Best Neighborhood for Investment (New York, Gates: real estate, subletting, apartment)

[kyw206]

Hi,

I am looking to buy a apartment to rent out as an investment to build wealth. I am only able to put down 10 %. Having said that, ideally a condo would best serve my needs. Otherwise I would need a liberal board that allows for unlimited subletting and requires only 10% down. My budget is $600000 max. I would only buy in a neighborhood that has a potential for significant appreciation in property value and where my rent charge can cover my mortgage and maintaneance. I think then either Queens or Brooklyn would be the best options. Manhattan is too expensive. Which neighborhoods would you recommend that I look into with these goals in mind. Any help would be greatly appreciated

thanks

-J

[SeventhFloor]

why dont you also look into commercial property....

or try looking in neighborhoods where parking is scarce.....find an old building, tear it down, make it into a parking lot and assign leases to the parking spaces. no maintenance either for a parking lot

[mead]

Residential property is pretty expensive these days. I think you would have to look long and hard to find a piece of property where the possible rent that you could charge would cover all of your mortgage and maintenance payments.

If that were the case most people in the city would just buy instead of renting.

[cjma79]

Usually you need 20% and not 10%.
Banks only finance 80% for income property.

[ctrres]

One of the things I love about NYC is the abundance of land in the outer boroughs. How easy it is to throw up another 400 unit building, overnight; to sell the picks and shovels to 49ers looking to "create wealth" and "cash flow."

The renters just yawn and walk past them.

[NYCrimelord]

Try Harlem, I heard from a very important politician, they are still trying vigorously to move out the unwanted people out of that area, so they can improve the schools with Bill Gates' money. They have good buildings with new anemities. LOL @ the fact, when I was in school I used to loan money to good old Billy, we were part of the Cambridge Crazies, those were the days before we all became unbelieveably, undeniably, unbashfully, rich beyond our desires.

[DITC]

Everything in New York is overpriced, after you leave Manhattan and its sprawl into Western Queens and Northern Brooklyn you are still in expensive areas.

The best "deal" as far as potential appreciation is New Jersey. I highly recommend Jersey City, Weehawken, West New York area because it has shorter commutes to Manhattan than much of Brooklyn and Queens, and these areas are much cheaper per square foot than Brooklyn or Queens. Plus the views up on the NJ palisades are spectacular.

[SPNARD1]

I agree with DITC... you should look into NJ...still some "good deals" in comparison to NYC

[jeffcon0]

In my opinion trying to invest right now is a losing proposition. On a $540,000 mortgage at prime (5.75%) you are looking at a one bedroom in a new condo in Brooklyn. You could easily get a 2 bedroom co-op for that much but it would require 20% down and have strict subletting rules.

Your carrying costs on a property like this would be $3,150 in mortgage and an extra $500 - 700 on maintenance/CC. With a monthly outlay of $3800 you will have an EXCEEDINGLY difficult time finding a tenant to cover that one bedroom. A fantastic one bedroom in even the nicest of Brooklyn hoods would run about $2500 to rent. This is why the numbers to buy right now (at least as an investment/income property) do not make sense. The disparity between cost to buy and cost to rent is huge at 50% or more. Don't forget to factor in opportunity costs, time spent managing the unit, and vacancies between tenants.

In my unprofessional opinion I think we are in for a slight downturn in prices of maybe about 10% and years of stagnation in housing prices as the mindset turns back to the traditional "buying your home to live in" as opposed to the specualtive fervor of the past few years.

I understand the "Manhattan is a luxury product" ethos and prices there may stay out of line for the average working person. However, this disparity has spread out to a lesser degree even to neighborhoods like Bay Ridge and Kew Gardens and other further out neighborhoods. Price inflation has been fueled by the explosion in Manhattan real estate and these areas which have been firmly middle class for ages are now out of the reach of those who have traditionally lived in the area.

People are very emotionally invested in their homes and won't let their profits of the past few years disappear so easily. They think their homes are worth the high prices of Spring 2007 and won't just let that inflated number evaporate. Instead they will likely sit on their places for a few years, let prices turn down a little, and let wages catch up.

Housing prices have remained at something like 3% growth per year throughout the last century and the market forces have a way of evening these things out. This uncontrolled growth has gotten totally out of hand and with tighter lending standards and uncertainty in the housing market there are too many potential buyers just waiting on the sidelines to see what happens. Buyers and sellers are at a standoff right now and it's going to affect the market negatively one way or another.

I know this post was completely long winded but I am trying to drive my point home that I do not think there is ANYWHERE in this city right now for an investor to make loads of money or even cover their costs.

NOW if you were going to buy something and sit on it and be willing to use it as your home for 5+ years I think there are good investments. I think jackson Heights could be in line for a boom due to it's proximity to Manhattan and it's unique housing stock of pre-war garden buildings. I think Bushwick will continue to rise and become the next hipster mecca of NYC (you may even be able to get a 3 or 4 unit there for 700k-ish). I think Bay Ridge, although a bit of a commute, has a TON to offer and is still mostly undiscovered by newcomers. If you are really ready to gamble I think Mott Haven/South Bronx could be huge in the long run. Washington Heights has that coveted "New York, NY" address and has some very nice pre-war buildings and an increasing presence of the much maligned gentryfiers.

The problem with all of these places is there are virtually no condos since condos generally come to an area once the boom has already hit. If they do have condos they are grossly out of sync with co-op prices and the rental prices you could get for your unit.

Moral of the story: Now ain't the time to buy in the interest of making money.

Sorry for the long post. It's just a topic I am very interested in.

[DITC]

Jeff I agree with you that now is a bad time to invest but for different reasons. I think its because there is already too much speculation and outsiders playing monopoly with our real estate (especially in this city) due to a weak dollar.

Everyone tends to think along the pattern: the Lower East Side was gentrified, then Williamsburg, Park Slope, Fort Greene...basically the pattern was spreading out from Manhattan. It seemed like Sunset Park would be next, and then after that would be Bay Ridge. However, there is no potential appreciation to buying in Bay Ridge simply because it is already expensive due to continued demand over the years from people who live in Southern Brooklyn. You cannot say Bay Ridge is the next Park Slope or Fort Greene simply because these were fringe areas and Bay Ridge has always been nice and priced accordingly. Bay Ridge is actually an expensive neighborhood, in fact all of Southern Brooklyn is already pretty expensive. It has its amenities because it is less Manhattan-dependent than most Brooklyn neighborhoods. You buy in a place like Bay Ridge to stay there for a while, like Jeff here who seems to really like the neighborhood for what it is, not for its x-minute commute to Manhattan.

Although I am not a fan of the whole gentrification scene as the resulting population is turning into a disproportionately high ratio of this city, I want to set the record straight here. If you want to invest in New York and MAKE MONEY you must buy in fringe areas because the nice areas are already expensive. To understand what to buy next, you want to truly understand geography, demographics, crime statistics, etc. You dont just go out on a whim and buy at the next subway stop. You usually want an area that when down the road after full gentrification will have an urban feel to appeal to newcomers and Manhattanites, and must have a close geographical feel and location to Manhattan.

The only areas worth investing in NY to make a real profit are fringe areas in Uptown and the South Bronx close to Manhattan simply because it is low priced and could be the next Fort Greene.

If you want to ride a wave invest in New Jersey. People dare not buy here now because New Jersey is "ewwww" to most. However, people had the same disdain for Bed Stuy back in the day because it was, GASP, "ghetto" in their eyes. (I know this is an NY forum, but NJ is a suburb of Manhattan just like the other 4 boroughs, and I have no affiliation with NJ real estate so this is not an advertisement. Simply my 2 cents.)

I dont know why outsiders are so obsessed with Brooklyn. Most of these people have no ties whatsoever with the place, and hence no REAL reason to live there. If you are going there to make money off homes, the big money has already been made off real estate in BK. Yet people still go in convinced they are going to make insane profits despite the past appreciation. If people would lose this name dropping obsession and cross the river to NJ, and not count out NJ, they would realize there is value there. Jersey City has the city feel many people want when they get priced out of Manhattan and therefore it is a good investment. Its somewhat rough but manageable, but wasnt Fort Green rough too? Also JC is closer to Manhattan, and the JC Path trains are basically a NY subway line that takes you anywhere in Manhattan.

If you dont want the downtown city feel, anything on the palisades such as Weehawken, West New York, Cliffside Park, Edgewater, etc give you much more bang for your buck than Brooklyn. Now you are talking some yard space and still a quick commute to Manhattan. There are buses everywhere, and the views are insane. If you want even more bang for your buck look Southern Bergen County and places along the Northeast Corridor line such as Rahway (dirt cheap, nice houses with yards well under 300k).