6 Things You Need to Know When Buying an Investment Property in NYC
It’s time to eradicate the myth that buying real estate in New York City is only for elite real estate moguls. Investors come in all shapes and sizes, and some properties are available for reasonable prices.
If you’re interested in buying an investment property in NYC, here are six things you need to consider:
1. Location, Location, Location
Know the market trends for the neighborhoods you’re looking in and research other rental buildings and inventory nearby. Find out if anything new is coming to the neighborhood that will make it more desirable, such as a new subway station or grocery store. Research the property tax rates and school zones, especially if you’re purchasing a two-bedroom apartment. Ask a professional in real estate about which neighborhoods in NYC are anticipated to grow and why.
Image by Gea Elika
2. The Property
Always see the property for yourself, even if virtually, before you buy. If you are purchasing a condo, get in touch with the building’s management to learn about what changes are coming up in the future. If you can, get a copy the building subletting policy and leasing application, and see what fees you might be responsible for paying. Some buildings even offer tax abatements or temporary tax reductions.
3. Sales Versus Rental Rates
You don’t want to end up paying more for a property than what you will be receiving in rent from tenants each month. Compare sale prices for properties in similar neighborhoods against typical rental rates to gauge the potential rental yield for the property; currently, rental yield in NYC is between three and five percent.
Be sure you know what the rental rates are, and stay competitive so that your units will always have tenants. If you are flipping the property, you’ll still need to know this information for potential buyers.
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4. Legal Issues
If you choose to become a landlord, you will be working with rental agreements, liability concerns for tenants, possible evictions, and more. Be sure to have an attorney on your side who can help you navigate these scenarios as they arise.
Be aware of your rights as a buyer and seek advice when encountering contracts, titles, and other legally binding documents.
5. Costs
Identify what costs are involved in acquiring and managing an investment property.
If you’re purchasing a condo with the hope of renting it out, review the rental applications at your desired building so that you are informed about any fees involved for owners and tenants. You may want to consider paying a company to maintain the property for residents if you rent it out, in case something breaks or needs to be replaced. For individual condo management, 5% of the gross monthly rent is the average rate. Most condominiums collect common charges for the building’s operational and maintenance expenses.
6. Time Frames
Know how long you want to own the property and study market trends. Are you going to hold onto the property for a decade and always keep it occupied or are you going to renovate and flip it? Whether it’s long-term maintenance or renovation costs, the length of time you intend to own the property should factor into your budget.
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