Despite lots of negative press about problems, The Big Apple is still a top pick for cities worthy of real estate investment.
And no, we’re not talking about a certain technology company and their ubiquitous smartphones. It’s time to talk about New York City, the most expensive and competitive real estate market in the world —and one that remains one of the smartest choices an investor can make, according to Hopewell Investments founder Scot French.
With a private markets investment firm based in New York City, French knows a thing or two about the present and likely future of its real estate market. While it’s a tough industry to break into —much like the city itself — French says that’s also what makes it so potentially lucrative for investors who learn how to navigate its competitive landscape.
“New York City still beats out other cities for real estate investment for one very simple reason: it’s got more people,” Scot French said. “We’re talking about the largest metro area in the country, with more than 20 million people. Yes, the opportunities are still here and they’re as diverse as they are lucrative.”
Of course, it’s fair to say that you need to have a certain level of cash on hand to make a successful go of investing in one of the most expensive real estate markets in the world. If you’re looking for the cheapest way to break into the market, NYC isn’t the way to go.
But for investors who have the capital, and maybe a bit of experience, there are several reasons to give The City That Never Sleeps a second look, French said.
For Rentals, A Low Supply And High Demand:
Occupancy rates have been stratospheric in New York City of late, reaching as high as 97 percent.
Prices have been increasing an average of 3.7 percentage points each year. With such an intense market, bidding wars often happen when the rare possibility arises of purchasing an existing rental property.
There are a few reasons for this continuing market heat, French said. For one, many people left the city during the pandemic, and have begun returning in droves, meaning they once again need to find a place to stay. Another is that many pandemic-era protections for New York tenants remain in place, allowing people to keep their apartments even if they can’t afford to pay the rent.
“No matter what type of rental property an investor is looking at, it’s going to be a trick to end up the owner — that’s the bad news,” said Scot French. “But usually the problem for making money from rental properties comes when you have to find and keep tenants. In New York City, it’s unlikely you’ll ever have that problem: demand is just too high and will likely stay there.”
High Rents Mean High Returns:
It’s not exactly rocket science to understand that New York City is expensive. It’s probably the one thing that most people all over the world know about The Big Apple —right after the Statue of Liberty, of course.
Rents are no exception and have continued to increase, seemingly without an end in sight. Average rent in the city in December 2022 reached $3,717, according to Zumper, and prices for Manhattan specifically topped $5,000 in 2022 —for the first time ever, Time Out reported.
“Property taxes might be through the roof, but so are the rents,” French said. “NYC investors can count on rents continuing to increase —along with their bottom lines.”
Even Single-Family Homes Can Be A Good Investment:
While multifamily real estate certainly remains more profitable, few New Yorkers live in single-family homes, making them extremely valuable.
While there are many fewer such homes available, they can still make lucrative investment opportunities in a market that continues to increase in value as quickly as New York, French said.
Though the price of purchasing NYC property can seem daunting or impossible, investors who find a way into the city’s real estate market will not regret the decision, the investment expert said.
“There are lenders in New York capable of helping with rental property loans along with financing for those who want to go the route of fix-and-flip single-family homes,” Scot French said. “For those investors who can move quickly and do their research, The Big Apple continues to offer big rewards.”
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