New York City real estate is renowned for investment opportunities. As one of the most famous cities in America and the world, New York City property presents unique investment opportunities. There is one problem, however. Real estate in New York is expensive. In fact, a report from Savills Research shows New York City as the most expensive city in the world to rent, and one of the most expensive residential real estate markets.
One might look at this and believe the high rates leave little opportunity for investment. That is not the case. There are ways to invest in New York City real estate even if you don’t live there. Here are a few of the best ways to do so.
1. Invest Through a Turnkey Property
A turnkey property allows investors to buy a property, turn around, and rent it immediately. This may sound impossible to find, but there are companies that specialize in selling these properties. This presents a unique opportunity for those who want to invest in real estate in New York City but don’t live there.
A property management company or a local employee may eat into profit, though it can go a long way to help manage your investments.
2. Try a REIT
Much like investing in a turnkey property, a real estate investment trust (REIT) allows local and global investors to invest in New York City real estate. There are a number of REITs that are heavily tipped toward New York real estate, including Vornado (VNO), SL Green Realty (SLG), Paramount Group (PGRE), Empire State Realty Trust (ESRT). A REIT, in many cases, allows investors to invest in commercial or residential property as well as mortgage loans. What’s unique about New York City REITs is their singular focus on commercial or retail buildings in prestigious properties like Grand Central Terminal or Union Square.
A REIT, generally speaking, allows investors access to a grouping of such properties that trade like a stock. By their nature, this provides dividend income (as they’re required to distribute 90% of their taxable income annually through dividends) as well as diversification opportunities. They’re also prone to risk in rising interest rate climates.
3. Buy Property Directly
A final, though likely cost-prohibitive, opportunity to invest in New York City real estate is through purchasing properties directly. This is easier said than done due to the inherent demand within the city. That being said, there are often stricter requirements investors face if they choose to invest in real estate in New York City.
What to Look for
Due to the extreme popularity in real estate investments, there are some things to keep in mind if you plan to invest. The first key is to realize you’re competing with many other investors. However, that isn't the only thing to look out for:
- Rent is determined by the number of bedrooms, not their size.
- Lower-income areas tend to have more maintenance issues as well as higher turnover.
- Compare sales price against what you can earn in rent so you don’t over-leverage yourself.
Ultimately, there is opportunity to be had investing in New York City real estate if you’re able to act fast and have a good plan in place.
The Bottom Line
New York is world-renowned for its real estate. There are numerous ways to take advantage of it and grow your wealth. Just make sure to do so with your eyes open to the risks.