Has Manhattan Real Estate Appreciation Value MAXED OUT??? (best neighborhoods, for sale)

[quelinda]

Originally Posted by mathjak107

with few exceptions rents have lagged to far behind buy prices even now to make buying a rental profitable in my opinion... real estate is not one area id invest in now..... but thats me..... to much opportunity in the stock markets now with 50 % of the risk out of them... to me its worth the wait even if they drop a little more... no tenents, and instant liquidity. as well as usually at least a 30%$ gain first year we bounce back ........ ill sooner wait there . aahhhhhhhhh....

Yeah, but you hold something tangible like a building rather than stocks that can literally pooof into nothing. Even the low priced stocks can poof even lower into nothing. A building still sits there and still collects rents and eventually (maybe another decade?) will probably climb mile high again.

[SobroGuy]

Umm...I believe that this last RE cycle merely took the Bronx out on a first date and gave it a kiss. The Bronx is now anticipating many future dates, and is in the process of getting fit, losing weight, new clothes, hairstyle, etc (for lack of a better metaphor). I think the most undervalued RE in the city is the South Bronx, and it is being completly rebuilt (literally) to appeal to the working/middle class, with the housing, amenities, retail, and green space to accomodate them. Of course I am biased as I live in the area, however I believe the next RE cycle, whenever that may be, will be all about the Bronx, and the South Bronx in particular.

[mathjak107]

Originally Posted by quelinda

Yeah, but you hold something tangible like a building rather than stocks that can literally pooof into nothing. Even the low priced stocks can poof even lower into nothing. A building still sits there and still collects rents and eventually (maybe another decade?) will probably climb mile high again.

For 25 years now my stock funds have surpassed our real estate investments with alot less grief....

will the future resemble the past? beats me but a 100 hundred year history of the markets is hard to ignore ... residential real estate according to case schiller long term beat the lowly treasury bill here in ny not by much if you dont count manhattan

when you compare you have to compare apples to apples which means if you dont pay cash for the properties and take a mortgage then compare them to stocks bought with borrowed money too.... take a diversified mix of index funds and try it, you will be blown away by the difference in gains

[SobroGuy]

Math I think you are right about str8 gains regarding stocks....but I think you are greatly underestimating the true value of real estate....you have to live somewhere after all. You can own something for 5% down, use the income from the additional rental(s) to pay your mortgage and additional costs and in many cases live free. In addition you earn any and all appreciation that may occur, plus receive significant tax deductions. Let's not forget the intagible but equally important value of home ownership. Nevertheless, if you look just at return vs return stocks will have RE beat..but there is alot more involved that make RE a sound, less risky, and a greater overall return. And if you think owning stock is less work than owning RE, you must not manage your own money..as stock prices fluctuate DAILY and can lose 100% value, as recent history has shown, in a matter of months or even weeks...that is somewhat common to stocks that is not common to RE. RE can be a headache to own, manage, but stocks are far riskier and can lose ALL its value in the blink of an eye...takes alot more work, knowledge, savvy, and dedication than owning a building.

[mathjak107]

Well from an investment standpoint i do both but my funds are the winners,.... index funds wont go poof unless every large company in the world goes poof , then i wouldnt worry about the real estate... remember we arent talking speculating where you buy a few stocks and pray.. we are talking total index funds or wilshire 5000 funds... they represent all our markets. as a place to live a house is a home first and not really an investment if you live in it.


there are no tax deductions in rental real estate in reality... you actually lay out those dollars,in fact most of the time you layout 3 bucks in interest, taxes or expenses to get 1 back.. even depreciation isnt real.. you have to pay it back when selling

[SobroGuy]

Regarding stock/index funds...they are decidedly down as much as the stocks that represent them are. Index funds cannot be up while the underlying stocks are down/bankrupt. They do spread the risk, but the risks, as we have seen recently are REAL and painful. Although you have winners today, who knows about tomorrow. All those big stellar credit Financial companies were considered stalwarts and safe investments, and people were "winners" for years, and now they are largely gone/bankrupt in a matter of weeks. POOF...just like that. The same logic and reasons you make about the index funds was the same people had about the financial "stalwarts." That does not happen to RE barring a natural disaster..and even then you have insurance! Regarding a house, it is first and foremost a place to live, but it is also an investment, as it is a place you park money (invest your money) and do look forward to appreciation. And in NYC specifically, many homes are 2 and 3 family, which provide income streams for the lifetime of the property, even after the mortgage is paid of course. In many cases the income stream from the rental greatly offset the mortgage and expenses, providing the owner with significant disposable income and tax breaks. Rental RE is a whole other animal, but you can have the best of both worlds with a 2 and 3 family home: 5% down, you live on the property oftentimes at a huge discount b/c the income from the rentals provide never ending cash, tax breaks, etc. Regarding the 3 bucks in interest..who cares...I have tenants paying that, so it is nothing out of my pocket. I get to live for very cheap, or even free, I have Tenants to pay mortgage (which includes interest), AND i get the tax deductions and deductions for expenses/renovations etc. As for depreciation not being real, thats like saying your stock appreciations aren't real because they are paper gains. Until you sell it is nothing but paper gains...that is no different than depreciation.

[mathjak107]

true, i always say a gain on paper is worth no more or less than a loss on paper but depreciation isnt a real true deduction, for every dollar you deduct they recapture it back from you at sale,.... very different from capital gains or losses on paper... when we first started out in real estate over 20 years ago it was really the depreciation every year that was actually giving us what we thought were our profits ,.. the rent barely equaled the maintaince and mortgage so it was the depreciation allowence that made us a small profit each year... what did we know about taxes,we were new at this.... well were we shocked to find that when we sold the apartment all that depreciation we wrote off for 18 years that we thought was a good thing was now due at regular income rates and recaptured as it reduces your cost basis by that much.... the big tax writeoffs are actually like spending 3 bucks at a carnival to get a 1 buck prize. keep in mind your actually spending those extra bucks and are not gaining anything.. its like giving the doctor 900.00 bucks and saying good now i get to write it off and get back 300... taxes, expenses and mortgage interest are all items that are costing you and your just about getting back only 1/3... did you know that depending on your interest rate and money down by the time you pay for that property it can cost you over 2 to 3x the price of the property in just interest alone over 30 years..... .

unless your buying cash if your leveraged any drop in your property can be magnified way beyond your origional investment. especially after closing costs are figured in. .... if you want to get out of a deal where your not covering expenses with rent you can loose way more than your origional money you put in.

dont get me wrong,for over 20 years now i have been wheeling and dealing co-ops in a family business as well as an investor in all asset classes....

my best performers have been my equities even with the drop. even including the maga buck central park apartments the returns werent on par...im just tired of tenants and the hassels of being a landlord... we all are and have been steadily liquiding over 13 million dollars in apartments over the last few years... i much prefer partnerships in untraded reits now for my real estate coverage in my portfolio. at this point a mix of 50% equities and 50% all the other asset classes should give us the 7% long term we need to retire early in a few years

[clevedark]

Good luck!

[mathjak107]

the problem with the 5% down thing is it sounds great but in practice its tough getting a positive cash flow from anything short of a tenement.

i do think that a 2 or 3 family with you living there are probley the best deal for you but it can be real trying sometimes when tenants are expecting you to be at their beck and call 24/7 though ..... and make sure you got lots of extra capital to cover legal fees, capital to cover 6 months or so of no rent should you have to go thru the eviction process, money for repairs and full renovations evey 10 years or so.. i cant emphisis enough how much extra capital you need to have for all the stuff not on the radar that comes up... property has a way of being a money pit just at the wrong times like the roof goes just when your evicting a non paying tenant. to consistantley make nice money in real estate dont believe these books for 1 second about it being a part time thing.... to make nice bucks its actually a full time job making deals,scouting for properties and seeking creative financing and as a job it better pay you as well as one

[NJ Chutzpah]

Northern Manhattan because it is last area bordering around midtown and downtown that has not been gentrified yet

Astoria, LIC, Williamsburg, Bk Heights (maybe not), DownTown JC, Hoboken have all been gentrified

Biggest Rooms and actually nicer buildings than the tenements south of central park

It is the cheapest part of manhattan right now, and it is in manhattan

Anyone who bought real estate in NYC during the bad times, like my boss, is not gonna suffer much, unless they made some bad decisions

The people who bought during the gentrification are kinda screwed on a case by case basis

But those trendy areas are still gonna attract rich kids and those rich kids will still have cash to burn during a recession or depression, so the long time landlords are still okay

Remember they bailed out wall street (even the hedge funds are getting a bailout)

If you wanna manage and profit, then it is about how well you can get people to move to your building at the rate you are charging

Northern Manhattan is an easy sell because #1 it is in Manhattan, #2 it is cheaper than the rest of manhattan to buy, so you do not have to charge an absurd rate just to break even