Embarking on the exciting journey of real estate investment and becoming a savvy landlord in the Big Apple can be a pivotal and game-changing decision in your financial repertoire.
With a whirlwind of questions swirling in your mind, one undoubtedly stands out: On a national average where are the hidden gems in New York that promise the greatest return on investment or rate of return for your rental properties? And believe it or not, there are still some affordable prices you can enjoy despite what others say.
Location, Location, Location
Location is a crucial factor in any real estate investment decision, including the purchase of a rental property be it in a major city, or one of the largest cities or most populous cities in NY.
New York State is a popular real estate market for buying rental properties, but it can be challenging to determine the best location to invest due to so many options available compared to places like San Francisco or even Kansas City.
The city offers a variety of amenities, including parks, a thriving job market, and numerous outdoor spaces in its diverse neighborhoods across its five boroughs. Additionally, there are several parks such as Prospect Park, Sunset Park, and Prospect Park South, as well as Central Park which is known for its beauty. Staten Island offers stunning views, and there are also attractions like Niagara Falls and other amenities in many attractive cities.
The demand for homes, apartment rentals, Airbnb investment properties, and rental investment properties, are all popular ways to invest in this state.
Below are some NY locations that offer the highest return on investment, specifically in terms of cap rate.
What's A Capitalization Rate?
For beginner real estate investors, understanding the concept of the cap rate is essential. The cap rate, or capitalization rate, is a straightforward calculation that measures the return on investment for real estate properties.
The cap rate is calculated by dividing the net operating income (NOI) by the property asset value.
The profitability metric doesn't consider the financing method for the rental property, but it can be useful for comparing the return on investment in different locations whether you're looking for a neighborhood's crime rate, going real estate prices, average rent price, monthly rent, price of homes and other housing prices before making any major investments.
Why is NYC real estate investment so attractive to investors?
New York is walkable and has a population of 8,174,290 people. It's been a hot real estate market for years and still ranks among the most expensive in the world due to high demand regardless of its high rental prices or purchase prices
It's the perfect moment to dive into the New York real estate market! With an abundance of housing options and a decrease in competition, buyers are in for a treat.
Throughout the state, there has been steady population growth, average job growth rate, and very little drop in population over the last few years.
NYC Rental Market is Robust
The high rental rates in NYC remain unchanged due to factors such as high population density and zoning regulations that limit housing supply. However, tax breaks are provided for converting warehouses and commercial properties into rentals.
Non-residential properties in NYC can be a good investment if converted into lofts, condos, or apartments, but strict eviction laws and rent control make it challenging to deal with problem tenants and increase rent.
Economic Impacts of the Pandemic
The pandemic caused a decline in rent growth in New York, as high unemployment led to increased vacancy rates and decreased demand for rental properties. This resulted in a surplus of rental inventory as leases expired over the summer.
The exodus of renters to Brooklyn and the suburbs is causing vacancies and falling rents in Manhattan, which will likely result in even lower rent prices than during the Great Recession. More people are renting in previously expensive neighborhoods because of lower prices and more available rentals.
Lease signings in Manhattan and Brooklyn have recently experienced the highest surge in the past 13 years, indicating signs of a comeback in the cities.
Other NY Real Estate Facts:
The growth rates of rents in the New York City metro area are listed as the fastest-growing cities.
Rent in New York City has seen a significant increase of 37.9% compared to the previous year.
The rent in Poughkeepsie increased by 37.7%, placing it in second position.
Hoboken ranked third with a significant increase of 37% in rent.
East Orange had the highest monthly rental growth, increasing by 5.3%.
Stamford rent was up 5.2, the second-highest growth rate.
Both Hackensack and West New York had a 5.1% rent increase, tying for third.
Supply and Demand
The luxury real estate market is experiencing an oversupply compared to demand. To attract buyers, luxury apartment buildings are adding more amenities. Additionally, properties are staying on the market for longer periods. Some luxury properties are even being subdivided to create more affordable units to sell.
Investors with sufficient funds can buy larger units in NYC real estate, divide them, and sell them at a profit. One can also invest in slower-moving one and two-bedroom apartments, knowing their value will increase over time.
Best Investment RE Options in NY
Buyer's markets are advantageous for real estate investors looking to purchase investment properties as there is a decrease in competition and prices are lower.
New York City as mentioned is divided into five boroughs, each corresponding to a county in New York State. Below are some real estate investment opportunities in neighborhoods across NYC that are buyer-friendly. These neighborhoods are selected from various boroughs:
Upper East Side of Manhattan
The Upper East Side, also known as UES, is a sought-after area in Manhattan, New York City. However, it is unaffordable for most people to purchase property there. A study revealed that it takes approximately 30 years of residency in the Upper East Side to make buying a better financial decision than renting. Despite this, there are still some relatively affordable options in the area, making it an attractive choice for real estate investment in NYC.
Luxury apartments are being built in large numbers, resulting in an excess of available properties. As a result, the average home price has remained stagnant at $1.8 million for the past five years. Homeowners are eager to sell their properties to avoid paying the mansion tax. If you believe that this area will recover, now is a favorable opportunity to purchase a property.
Yorkville is experiencing growth due to the recent opening of the Second Avenue subway, making it a favorable neighborhood for real estate investment in NYC. The cost is lower in comparison to the more upscale Upper East Side neighborhoods. The perception of "expensive" varies when it comes to investing in NYC real estate.
In the vibrant city of New York, the Upper East Side stands as a beacon of safety amidst the bustling streets. With apartments on the west side of Lexington Avenue commanding prices of $2,500 to $3,000 per square foot, and the charming neighborhood of Yorkville offering a more affordable option at around $1,500 per square foot, it's clear that the Upper East Side is not only a haven for tranquility but also a wise investment for those seeking a slice of the Big Apple. Families with children are in for a treat with a wide range of services and facilities designed to cater to their needs.
The Upper East Side is currently experiencing a surplus of homes for sale, resulting in a favorable market for buyers. This provides buyers with a wide range of options and gives them an advantageous position in price negotiations. Sellers are adjusting their prices to be competitive.
Inwood is cheaper than other areas in Manhattan. Buying is a smarter option for potential residents after five years, compared to the 12-year tipping point for all of Manhattan. Inwood is not experiencing an influx of new development that has negatively impacted home values in Murray Hill. This is due to its location at the tip of Manhattan.
One may want to consider investing in New York City real estate in a New Jersey community that offers low-rise homes and apartments that are up to eight stories tall. There is a lack of affordable high-density apartments in Inwood due to the absence of zoning changes for taller buildings. Home prices in the area have increased by 14% in the past five years.
Investing in property in New York City can yield high returns, even if high-density development doesn't happen. The median home price is over $500,000, with median rents at just over $2,000 a month.
Discover the magical wonders of Inwood Hill Park, where lush forests and enchanting trails await your exploration. While commuting downtown is usually a breeze, be prepared for a few delightful hiccups on the vibrant East Side. Welcome to the charming and enchanting Inwood neighborhood known for its tight-knit community filled with warmth and love, it's the ultimate haven for families seeking a place to call home.
Washington Heights is a Manhattan neighborhood known for its favorable investment opportunities. The value of it is gradually rising due to its affordability. When staying for a long time, it is generally seen as better to buy a property rather than rent. There is also a good chance to invest in real estate in NYC, as condos are priced below $1,000 per square foot.
Washington Heights has tax abatement condominiums with affordable rental rates and lower tax bills. Additionally, there are expensive colleges in the area, leading to a larger renter population that is not affected by rental rates. With multiple schools in the area, there is no need to be concerned about the student market collapsing if the main campus closes.
Over the past five years, the average selling price for two-bedroom homes has increased from $550,000 to $650,000, representing a 20 percent appreciation. This equates to an annual growth rate of four to five percent. The property prices in Manhattan as a whole are not as good as this one.
Washington Heights is currently a buyer's market, with high supply and low demand. Buyers can offer less than the asking price and have a good chance of getting their offer accepted.
Bay Ridge, Brooklyn, NY.
Brooklyn is often regarded as a more budget-friendly option compared to other neighborhoods in New York City.
Bay Ridge: The Hidden Gem of Brooklyn is where you can get in on the action now while it's still affordable because this neighborhood is about to explode with first-time home buyers, according to those in the know. Don't miss out on the opportunity to invest in real estate before it's too late!
Investing in Bay Ridge is a logical and reasonable choice as the area feels suburban because it's far from Manhattan. Bay Ridge is currently increasing in value because of the new direct ferry service to Wall Street.
Property prices in these areas have dropped due to uncertainty about the Brooklyn-Queens Expressway and low demand during construction. Buying apartments for $100,000 may be difficult to rent out and may not appreciate. Bay Ridge in Brooklyn is a more stable option.
The current average price for a two-bedroom apartment is over half a million dollars, which is $100,000 higher than it was five years ago, resulting in a 10% annual appreciation over five years. Bay Ridge received a C rating for crime and safety, which is similar to the average for New York City. The public schools receive a grade of B. Additionally, the neighborhood offers more amenities for parents compared to other neighborhoods, although it may come at a higher price. If you're interested in investing in NYC real estate, Bay Ridge is a recommended location.
Bedford-Stuyvesant in Brooklyn has it all along with cheaper housing options. Watch this neighborhood appreciate as trendy cafes and stores flock to the area and property tax rates are lower here too. It's the perfect spot for real estate investment in New York City!
Homes in Bedford-Stuyvesant cost $1.4 million, while in Williamsburg it's $2.5 million and in Cobble Hill, it's $3.5 million. This indicates potential for appreciation. Investing in NYC real estate in Bedford-Stuyvesant has the advantage of subdivided properties, allowing for rental income while buying a single-family home at the same price.
This area is considered suitable for real estate investment in New York City. The market has shown a steady appreciation rate of around 16% over the past five years, with an average annual increase of 2-3%.
Bedford-Stuyvesant is currently a buyer's market and this means there are more homes available than there are buyers.
Long Island City
Long Island City is regarded as a desirable real estate investment in Queens, New York, with an average home price of around $1,200 per square foot, which adds up to a total of over $1 million. On the other hand, the east side of the neighborhood is more cost-effective. The prices for homes in the eastern neighborhoods of Long Island City range from just above $500,000 to less than $800 per square foot.
Looking for affordable housing options? Look no further! This area has it all, with prices that won't break the bank. But, here's the catch, accessibility to the Long Island Rail Road is not guaranteed. So, while property values are on the rise, don't expect a sudden and dramatic surge. Home prices in the area have skyrocketed, soaring over $260,000 in just five short years.
The growth rate has been almost 10 percent annually for the past five years. However, there is still potential for further growth. According to Niche.com, Long Island City is considered a good place for families, receiving a B rating for crime and safety, which is quite good for New York City. The schools also receive a B rating.
Long Island City is currently experiencing a buyer's market, which provides advantageous opportunities for buyers due to greater availability of choices and less competition.
Please note that the information provided regarding median rents in local neighborhoods is sourced from various reliable sources. However, it is important to consider that the data may not fully reflect the current state of the local real estate market.
Should I Buy Property in NY?
Real estate is a reliable long-term investment whether the economy is good or bad or there's a crisis. Real estate values have risen in the past decade so that's a plus.
Learning about the location is important for your real estate investment and NYC real estate is highly regarded.
Many people want to invest in NYC real estate despite the high prices because there are plenty of opportunities and affordable neighborhoods to choose from.
Investing in properties in New York City is a smart move as you'll see property values increase and can charge market rents without any risk. Just make sure you have a solid plan in place before you start.
Are you prepared to begin capitalizing on the current opportunities in the real estate market?
If you're looking to invest in commercial or residential property in Long Island or New York in general, be sure to hire professional Realtors like Taleene and Ritchie Krug Jr. who can find you exactly what you're looking for in terms of the best home, commercial property, or residential property like a house, condo, or townhome. Lifelong residents of Long Island, are part of a team with more than 40 years of combined real estate experience. They have a deep understanding of how real estate has evolved through the years which results in a team with unique dynamics and expert negotiating skills being put to work on your behalf. With 20 offices spanning Brooklyn Queens & Long Island, nobody is better equipped to handle your real estate needs.