As we enter into a COVID-19-induced recession, many real estate investors say that this is the time to have cash ready to buy properties. Good investors understand that there are opportunities during times of panic, but wise investors know the obstacles to navigate when finding some of these properties.
This article will focus on a few aspects of investing to watch out for when buying a property in the midst of an economic downturn.
Let’s be honest, there is a pretty small chance that you are going to find a well-maintained property with great tenants during a recession, where the owners just couldn’t pay for it anymore. Most owners of investment real estate who take great care of their property and have reliable, well-behaved tenants in place are doing well across the board—they also understand the importance of asset reserves and protection in times like these.
Odds are if you find a great recession deal, you’re looking at a lemon when it comes to deferred maintenance. This isn’t necessarily bad, though. You can score some great deals on these types of properties and turn those lemons into lemonade! Just understand that you will likely have some big fixes to attend to, because the sellers probably used every last dollar they had to just keep the ship afloat in the first place.
Have an inspection done on the property and be prepared to front a little more for capital expenditures. When it comes to reserve dollars, it’s better to have them and not need them, than to need them and not have them.
Another type of property to be aware of is the classic “non-performer.”
These properties often show characteristics of poor management. Non-performing properties may consistently have problems obtaining rent, whether it’s from irresponsible tenants or pushover management. We have commonly seen this in properties that are fully paid off and have no debt service (often self-managed).
You can spot a non-performer by identifying lazy bookkeeping and shoddy maintenance practices. These properties are frequently sold by sellers who need help making ends meet. And if they’re in a pinch, you might be able to get a good deal.
There are a host of reasons why targeting these properties is a good idea in recessionary times, but just understand that you’ll have an uphill battle when you buy one. You need to have a plan in place to recover the asset.
Recessions can really hit hard for people who live paycheck to paycheck. This can turn into a problem for investors who are purchasing property during a recession.
Now, that’s not to say that all properties are going to have tenants that are unable to pay during a recession, but there might be a few non-paying tenants that go “unreported” on sellers’ books to make the property appear more attractive.
You need to do your due diligence and dig deep to make sure that the sellers are not offloading a property to sidestep a hefty round of upcoming evictions that will fall into YOUR lap after closing. You can negotiate these things into a contract and help avoid some serious headache and financial strain post-closing.
Review the seller’s numbers and see if they match what the leases say. If they don’t, maybe ask to see proof that the payments were submitted, such as bank deposit statements. You need to feel confident that you are getting a property that has paying tenants.
It’s a tough pill to swallow if you purchase a property and then don’t have any rent coming in to pay the mortgage—on top of already mounting eviction fees—when you were planning to use the rent to cover expenses. So be sure to do your homework!
These are just a few things to look out for when buying properties in a recession.
I personally think an economic downturn is a great time to purchase assets at a discount. By applying a little wisdom, you can begin paving your path to financial freedom.
Florida’s housing market is constrained by tight inventory which is not likely to improve significantly due to several challenges cited in a new report from Florida Realtors.
Chief Economist Dr. Brad O’Connor sees robust growth for the market with strong immigration and low unemployment in the state. Home sales are expected to gain 4% year-over-year in 2020, similar to 2019.
Last year, Florida saw an uptick in sales despite a 9% pullback from international buyers.
“It was exciting to see the almost 6% growth (5.9%) in closed single-family sales in 2019 from 2018,” O’Connor said. “Florida topped over $100 billion (total of “$101.9 billion) in volume in home sales last year, up 8.3% from 2018; for condo-townhouses, we reached $31.6 billion in volume, up 1.8% over the 2018 figure.”
But with new listings down 11.4% year-over-year for single-family homes and down 9.7% for condos, prices are set to rise around 4%, although O’Connor doesn’t see that as a problem currently.
“The median sales price still continues to rise, but looking at what the monthly mortgage payment is, that’s still a lot lower due to current historically low mortgage rates,” O’Connor said. “And that continues to drive sales and makes it a good time to buy.”
Supply side issues
The challenges to increased supply in Florida were discussed at the 2020 Florida Real Estate Trends summit during last week’s Florida Realtors Mid-Winter Business Meetings.
One of the panelists was Kristine Smale, senior vice president, Meyers Research, who says that there are three main factors restricting supply: higher construction costs, which moderated slightly in 2019 but are expected to rise again in 2020; a shortage of labor – 2019 had the largest amount of construction job postings since the Great Recession; and a lack of available, affordable land supply.
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Is this crazy? I sat there with my 23-year-old head spinning—looking at the first $400,000 multifamily rehab project that I had just put under contract.
You’ve probably asked yourself (at least) a couple times if it’s crazy to get into real estate, too. If you asked your friends and family instead, they probably immediately answered, “Yes!”—followed by a spiel about whatever aspect of managing a real estate business that scares them most.
Maybe they mentioned the risk of a market crash, the challenge of dealing with tenants, or the pitfalls of negotiating with contractors. It’s only human. We fear risk.
We fear risk even when our fears are irrational.
Even if you drink the real estate Kool-Aid and know that real estate can be an amazing way to build wealth, the fear probably hits you each time you’re about to write an offer on a building. Do I really know what I’m getting myself into?
Right Before the Plunge
On that night in May 2017, I was on the verge of taking what—to many people—would look like the biggest risk of my young life. I was 23, had recently graduated from college, and had barely six months of real estate experience. This project would pit me and my business partner against countless situations we were not prepared for, faced with countless questions we didn’t know the answers to.
Luckily, as real estate investors, it’s not our job to know the answers. It’s our job to know the numbers.
The numbers on our first rehab deal told us that even in our worst-case scenario—even if everything that people warned us about went wrong—taking the plunge would get us closer to financial freedom than sitting “safely” on the sidelines ever could.
Why are we comfortable losing money, as long as we know how much we’re going to lose?
As a recent grad, most of my college friends ended up in big cities on the coasts.
In 2017, the median rent in Manhattan was $3,150 a month. According to Rent Jungle, the average rent for a one-bedroom apartment in San Francisco was even higher: $3,334 a month. Over the course of a year, that adds up to $40,000 in rent for a one-bedroom apartment.
For reference, the median family income in the city of St. Louis is $52,000 a year. In St. Louis, that money can buy buildings.
On the coasts, it buys you the right to spend up to 39 percent more than the national average on basic necessities like groceries. The costs are pretty crazy, but the craziest part is that spending a family’s annual salary on rent is somehow considered a perfectly normal financial decision for a young person to make.
Young people spend that money with no expectation of getting a return. Rent, groceries, and transportation are costs—not investments.
What is the risk of embarking on a rehab project compared to the 100 percent certainty of spending $40,000 a year on rent?
How We Measure Risk
Risk is exposure to uncertainty. Because of this, renting doesn’t feel like a risk. Neither does spending a lot to live in a big coastal city. The costs are large, but they’re constant. We know them up front: $40,000, paid in tidy, predictable monthly increments.
Or do we?
What is the real risk of renting away your twenties—and how do you compare it to the risk of a rehab project? Does renting in a big city make your financial future—not in 10 months, but in 10 years—more certain or less so?
When you’re embarking on a rehab project, uncertainty stares you in the face. The risks are all right ahead of you, a landmine of knowns unknowns:
Do we have our contractors lined up in the right order?
Have we done everything we need to pass inspection?
Will we hit our rent targets once all the work is done?
Is it cheaper to fix this or replace it?
Those seem like hard questions to answer. Small wonder that most people warn you away from real estate.
Except when you’re following a safe, “normal” path, uncertainty isn’t gone. It’s just waiting for you out of sight.
Five years from now, will I be working at a job I don’t like? Or will I be free and doing the things that matter to me most in life?
Ten years from now, will I have the resources to protect what I love? To support my family, friends, and community?
Those are hard questions to answer.
For me, those questions would have been impossible to answer if I lived in a big city on the coast, took a fancy job where I was well paid but spent most of my salary on rent and groceries, and had to spend most of my time working for someone else.
We are conditioned to deal with long-term uncertainty the same way we’re taught to deal with short-term risk: by avoiding it.
But avoiding risks doesn’t make them go away. It doesn’t teach us anything. It doesn’t get us any closer to answering life’s hardest questions.
The numbers on our first rehab deal told me two things. In the worst-case scenario, I would come out of the deal not losing any more money than someone who chose to rent in a big city. In the worst-case scenario, I would come out of the deal with an education that would allow me to take control of my financial future.
I could live with that.
The Numbers Tell the Story
My business partner, Ben Mizes, and I started our real estate portfolio with an FHA loan. We were only required to put a small down payment on a relatively stress-free, low-maintenance fourplex.
Five months later, we were planning to borrow $315,000 from the bank and $105,000 from private family investors and spend as much of our own time, sweat, and money as it took to come out the other side of our first four-unit rehab.
We were upgrading kitchens, bathrooms, and AC units to bring the rents up from $825 per door to $1,400 per door—a 70 percent increase.
With renovations complete, Ben and I would try to appraise the building for $700,000. Depending on the lender, you can borrow between 70 to 85 percent of a building’s appraised value. In this range, as long as we hit our numbers, we could completely repay our investors, recoup our costs, and walk away owning a cash-flowing castle.
The potential upside was clear. Just as important, we looked at our downside.
Ben and I modeled a worst-case, “do-nothing” scenario, trying to understand what would happen to us if we got stuck and couldn’t complete the rehab at all.
What Could Go Wrong?
Ben and I had a contract to buy the building for $420,000. At the closing table, the seller would credit us for the $20,000 worth of repairs that had to be done immediately: fixing a collapsed sewer, repainting and sealing damaged windows, and replacing falling fascia boards.
Note: We always, always, ALWAYS make our buildings watertight before doing anything else. If they aren’t watertight when we buy them, we negotiate for repair credits to fix problems on the seller’s dime—immediately upon closing.
The $20,000 repair credit provided by the seller brought our effective purchase price to $400,000. Combined, our mortgage payments, taxes, and insurance came out to $2,277 per month.
The numbers told us we could make our mortgage payments comfortably, even in its current (read: very rough) condition. The building was generating income of $3,350 per month, or about $825 per door.
Assuming we got completely stuck and had to keep renting the units out for their present value of $825, we would have $1,073 per month with which to pay all of our fixed and variable expenses. Utilities and HOA fees (the building is in a private subdivision with an annual assessment) came out to $380 per month, leaving $693 a month to deal with variable expenses.
In a worst-case scenario, we would be self-managing to save on property management fees. That would still leave us with vacancy, repairs, and maintenance costs, and the need to set aside money each month for a capital expense escrow.
Was $693 really enough?
Under our most-conservative model, we planned to put aside $10,000 each year for repairs and escrow. After five years, that equals $50,000 put into proactive maintenance—enough to deal with a roof, a complete tuck-pointing redo, and major structural repairs.
Then, we figured 10 percent vacancy cost—high for the area but not impossible if we had hard luck. What was the worst that could happen?
Under our worst-case model, we would be losing $600 every month. Losing $600 a month is a losing deal. That’s not a deal that gets you on a podcast. It’s not a deal that successful investors show off in a blog post.
Luckily, it’s not the deal we ended up with, either. (Spoiler alert: We came out of this rehab with a lot more paint on our shoes but a lot more cash in the bank, too.)
But when we talk about “risk,” here’s the curveball question: Would this “worst-case” deal be a step away from, or a step toward, financial freedom? Let’s look at those numbers again.
The Difference Between Costs and Investments
An investment is any place where you can put your money, such that it creates more wealth over time. In the model above, a lot of the expenses that look like “costs”—that is, look like places where Ben and I would have lost money—are actually investments, places where our money helps us build wealth.
In our worst-case scenario, we would pay $600 a month (on average) to cover the costs of repairs and build a sizable rainy day fund.
However, our $1,600-per-month mortgage would be completely paid for by our tenants. In the first year alone, our tenants would pay for our ~$14,000 interest payments and help us build $5,000 worth of equity in the building.
Over time, that equity build-up only accelerates. In our thirties, Ben and I will build up $85,000 through principal paydown alone (pun intended).
The amazing part is that would be the case even if the rehab project was a complete failure. Breaking even on mortgage and utilities and scraping out of pocket to cover unexpected repairs, Ben and I would still be positioning ourselves to accumulate passive wealth in the future.
2. Proactive Maintenance
If you spend $50,000 on a building in five years, it becomes a lot cheaper to maintain. Under our worst-case model, we would have $10,000 a year to deal with maintenance issues before they became more serious.
When you budget to deal with problems up front, it makes for a less-impressive pro forma—but it also means that maintenance costs get significantly lower over time.
If you plow $10,000 every year into it, even a problem-ridden property will get easier and easier to take care of. It might be a painful cost to swallow in the short-term, but you haven’t lost the money that you spend on a property you own. You’ve just re-invested it.
By contrast, if you spend $40,000 in one year on rent, the money is out of your hands for good.
3. Hands-On Education
When you buy your first rehab, the most important investment you make isn’t in the building. It’s in yourself. You’re taking out (quite possibly) the only student loan in the world that can pay itself off in less than a year.
The most daunting part of diving into a real estate deal—the part that makes people say it’s too risky—is that you don’t just stand to lose money but time, too.
The time costs on this project would have made this a losing deal for a veteran investor. We spent untold hours painting, fixing plumbing, and (like you saw above) drilling holes through concrete when a contractor dropped the ball on us.
But we weren’t veteran investors (yet!). As Ben and I looked at the numbers together, we realized we were buying ourselves both a building and an education, too. Even if we broke even, we would come out of the project with an education that in itself was worth hundreds of thousands of dollars.
A few years ago, I sat looking at the numbers on a $400,000 real estate deal that could either set me on the fast-track for financial freedom or go completely off the rails. In the end, both things happened.
My business partner and I got screwed over by not one but four different contractors before we finished the project. One caused thousands of dollars of water damage to the floors, embroiled us in a months-long insurance claim, and tried to take us to court after he lost.
We dealt with an irascible tenant who threatened us and damaged his apartment.
Time and again, things took more time, sweat, and money than we had expected. But the age-old mantra of real estate investing held true: You make money when you buy. The numbers of the deal were strong.
And now that we’re done dealing with contractors, tenants, and renovations (at this property), we have a building that rents for $1,400 a door, water-tight with low maintenance costs, and a fair market valuation between $650,000 and $700,000.
Now we are on pace to refinance the building, fully repay our investors in the first year, and walk away with the funds to do it all over again.
Taking the Plunge (Again)
Is this crazy? Fast forward and I’m sitting here, head spinning, looking at the numbers of a 20-unit deal in St. Louis.
Since starting our renovation project one year ago, we’ve used the education and cash flow we gained from it to build a 22-unit portfolio—and a high-growth startup.
Now, with a refinance underway, I am looking at a deal that could double the size of our portfolio overnight, all while working full-time.
A new project brings new unknowns. More questions we don’t know how to answer and lots more numbers to keep me and Ben busy.
Sandy Silva, a 39-year-old sales director at Tulip Retail, a software platform for retail companies, with her seven-year-old son, Xavier.
In 1999, Sandy started dating her soon-to-be husband, Ryan, in Waterloo. She studied economics at Wilfrid Laurier University while he took political science at the University of Waterloo. In 2002, they got engaged, and Sandy’s father gave them an early wedding gift of $75,000. Sandy and Ryan used that money for a down payment on a $289,000 pre-construction two-bedroom condo in CityPlace. In 2005, they got married and moved into the unit.
Within a few years, they were thinking about having children, and being near family became a priority. At the time, they both worked in Toronto: she was a buyer for Sporting Life and he was a supervisor at an automotive manufacturing company. They used their combined savings, along with equity from refinancing their condo, to buy a $470,000 detached house in Brampton, where Sandy’s parents lived. Meanwhile, to make some extra cash, they rented out their CityPlace condo for $2,150 a month.
The value of their properties increased enough, after four years, that they decided to leverage their equity to scoop up more real estate. They knew, from having lived in the Waterloo Region during their college years, that demand exceeded supply in the area. Ryan also had family in Waterloo, which meant someone could take care of their investment properties. So they bought two detached houses in Waterloo for a combined $462,000 and rented them to university students for a total of $4,675 a month. The rental income was enough to pay their mortgage and turn a profit. In 2013, Xavier was born.
Three years later, Sandy and Ryan separated. Ryan sold the two Waterloo homes for a total of $540,000 and split the $78,000 profit with Sandy. He also kept the place in Brampton. Sandy held on to the CityPlace condo and took $250,000 in equity from the Brampton property, which she used to invest in Rent Frock Repeat, a designer dress rental company.
The bottom line
Sandy recently joined Tulip Retail as a sales director. She lives part time at her CityPlace condo, which is now worth $850,000, otherwise she stays at her parents’ place in Brampton with Xavier. And Sandy’s not done investing. She recently bought a one-bedroom condo in Vaughan—which she plans to use as a rental property—for $525,000. Her portfolio is now worth $1.375 million. Before the end of 2020, Sandy would like to buy a place in Brampton.
Source: Toronto Life – BY ALI AMAD | PHOTOGRAPHY BY GIORDANO CIAMPINI |
Moreover, as much as 30,000 new units are expected to enter the supply chain this year, compared to the 20,000 completed in 2019.
However, Urbanation president Shaun Hildebrand warned that this virtuous cycle of sustained demand impelling further market growth has an upper limit, as rent will eventually be unable to cover monthly carrying costs.
“There is a tipping point,” the executive told the Toronto Star. “We’re seeing a big shift in demand for micro-units, small studios that are really the only type of unit in today’s market that’s priced under $2,000 a month. You’re starting to see some migration from the downtown markets into the 905 where it’s cheaper; renters are gravitating to older buildings.”
By 2023-24, Hildebrand estimated that condo investors will need a steep $4,000 a month to carry units, assuming a 25% down payment and a 3.5% interest rate.
This is the point where Hildebrand expects the market to hit a snag, as it’s unlikely that tenants will be willing to put up with costs fully 60% higher than the current rent average of $2,500.
“I’m not sure that condo investors that have been active recently in buying pre-construction units fully appreciate how much supply is underway in the condo sector and what that will do for their assumptions for returns,” he said.
“For a little while it’s going to feel like we’re building enough rentals because there’s going to be a lot of investor-held units coming into the market, but it’s going to be temporary.”
Knowing the best age to invest in real estate is one of the most frequent doubts that those who are beginning to think about their future have. Especially because they see in the real estate area a financial security that other types of investment as the stock market no longer offers.
The short answer is that there is no right age to invest, but the sooner you do it, the more opportunities you will have to make money – and your investment will last longer.
However, it is true that investing is not a habit that we have all been taught. Not all of us receive financial education, and some do not even have the habit of saving money. We know that it can be difficult to do when you are young and you are between your twenties or beginning the thirties: travel, shopping, transportation expenses and fashion technology tend to monopolize the attention of your money.
Unfortunately, this lack of financial education ultimately affects the future. Especially when you decide to start investing and you realize how much time you lost because you did not do it before.
Why should we start investing as soon as possible?
Something that guarantees the value of a property is the capital gain that it has, depends on the location in which the property is located. The capital gain acquires more value over time. That is why the big investors are those who can analyze the market and see beyond what is trendy. Imagine if 10 years ago you had invested in real estate developments in the Riviera Maya, or in real estate developments in Tulum, places that are currently a magnet for tourism and foreign investment.
That’s why we say that the best time to invest is now; the more time you spend, the less chance you will have of acquiring properties at a lower cost that guarantees a high return on investment.
We must also consider that the responsibilities we acquire over time can make it more difficult to become a real estate investor. Marrying or having children can make you reconsider your expenses and how much money you can use to invest.
Each individual has different priorities and opportunities. There are those who see in their twenties the opportunity to promote a future while there are others who can invest only after their 30’s or 40’s. It is also normal and natural for some to think about investing until after retirement, when they have the money to do so.
Nor can we deny that each generation has different perspectives on what we should consider a priority and what not. For example, while for millennials acquiring experiences is a priority -as traveling- for generation x and baby boomers, acquiring properties is more important.
However, this does not mean that millennials – who are between the ages of 23 and 38 – have a chip that prevents them from being good at investing in real estate, on the contrary it is they who are changing the notions of success and ways of doing business and even as we think about work and lifestyle, this makes them less incompatible in investing in real estate, they are the ones who are beginning to consider investing their money to obtain financial independence.
For example, for the baby boomers and generation X financial security meant having a stable job and a fixed salary in order to save for retirement or get their pension. Today the notion of working from home without the need to attend an office is a reality for many people, as well as the existence of jobs that 30 years ago were difficult to imagine.
30 years ago it was hard to think that ordinary people could make money using the internet. Computers and the Internet were exclusive to those who were studying something related to technology. Today you do not need to be a hacker to be able to use digital platforms to make money like blogs or investing in services like Uber.
The orange economy – that is, the creative economy – allows retirement to become more possible at an early age. Which has also become possible because more and more people decide to invest their money in a smarter way – and do it at a young age – to be able to live on their investments and not have to be dependent on a job.
Years ago we thought that buying a property was to live in, today thanks to applications like Airbnb, more and more investors decide to buy apartments and houses only to rent them on these platforms.
You do not need to be a millennial to start investing. The technological evolution has made both applications and platforms as well as access to them, are increasingly easier to use.
For example, since 2017 Airbnb host users over 60 years have increased by 120%, while women over this age have become the best rated on the platform. Which indicates that even baby boomers see technology as an opportunity to get a better return on investment with their property.
What is the best age to invest in real estate?
As we mentioned, not all ages or stages are the same for every person. For some it may be impossible to invest in their twenties and find the possibility of doing it later.
Our best recommendation is that rather than being guided byan ideal age you start doing it for the goals you have and the opportunities that come your way.
There are many myths around investment, especially when you want to do it at a young age, and one of the factors that keep people away from real estate investment is the lack of knowledge on the subject and investor stereotypes. We are not surprised when we hear cases of clients who want to become investors but fear not being able to do so because they do not understand numbers or be experts in the subject.
Knowing the real estate sector is one of the biggest keys to becoming a successful investor, this does not mean that it is a privileged knowledge that you cannot access.
Many millennials have the fear of investing in real estate because they think they need to buy a house to do so, and they ignore the investment possibilities that residential or industrial lots have.
For this reason, they fear not being able to do it because they believe that it is economically impossible for them, and they do not consider the possibilities of acquiring properties in other cities. For example, for some foreigners, investing in Mexico is a better option than doing it in their countries, but in the same way for some Mexican residents, investing in states such as Merida where there is increasingly strong demand in properties not only for housing but also for businesses and offices, it can be more accessible and profitable than doing it in places like Mexico City.
That is why it is important that you do not wait to have an ideal age and start thinking about becoming an investor or making an investment from now on. So the sooner you do it, the sooner you can designate your budget and create a work plan to invest or start saving money and then invest.
Otherwise, as you let time go by, you will be less likely to find suitable properties for yourself and especially if you have the opportunity to invest in places that are in presale in areas that will later have even more capital gain.
How to start investing in real estate?
One of the most common mistakes made by young people who aspire to become investors is to obtain immediate profits and be able to spend them on whatever they want. But as you know, this is not possible in the real estate market.
Being an investor is a goal of many to be able to have financial freedom and not be tied to a job or to live experiences like traveling or living in different parts of the world, investing to earn money immediately is not an actual goal.
This does not mean that you cannot earn an income in a short period of time. For example, apartments near tourist areas can generate profits if you decide to rent them. The same happens if you acquire property near schools, universities or hospitals.
What we really mean is that if you want to invest to enjoy the results you need to be patient and prepare constantly about the subject.
The preparation on the subject not only includes understanding how the market works, but also observing and analyzing where it is going.
That is why it is very important that you start to know very well and read everything about the area and the developments that are developing in the city you are looking to invest. Find out about the market and how real estate works in the place. About the papers you must have in order and the types of credits -if you’re considering obtaining one- to which you can access.
Begin to consume information and observe how other real estate investors are generating income with their properties. One of the advantages of investing in real estate is that it is a safe investment, but it also gives you the opportunity to take advantage of your investment.
There is a lot of information especially now that we live in the age of the Internet, but it is always good that you can approach the experts and work with a real estate agent to solve your doubts if you are already thinking about acquiring a property. Ask everything you need to know about the property and the area: the places of access, the maintenance fees, the projection of growth and the amenities with which the development has.
What factors should I consider when investing in real estate?
We already mentioned in our definitive guide of the real estate investor, if you want to be successful when acquiring a property you need to analyze the location and interests of your possible market without letting yourself be guided by the trends.
Actually, what makes your property acquire value is the capital gain of the area. This depends on external factors such as the location, amenities and even the roads that the property has.
Mérida is a city that we love to take as an example because the boom that is experiencing is related to the intervention of factors such as security and the excellent location in an area that attracts tourists and allows them to have access to beaches and archaeological sites.
In the best cities to invest in Mexico we have also mentioned the importance of decentralization that Mexico is living and Mérida is an example of how the diversity of industries can be an important factor in the development of the economy and in the demand for properties and offices, and therefore is another opportunity to ensure your future.
The more diverse of jobs and industries, the more likely you are to be victorious in your investment, as in the case of a crisis, for example, the closure of a factory or a big company that is in the area.
That’s why we emphasize the importance of not investing where everyone is investing, in the end -it may sound cliche- you get what you pay for.
Many new investors make the mistake of acquiring goods in areas that, although cheap, end up being insecure. In the end these investments end up being losses because they end up investing even in luxury finishes in areas where house prices are quoted in an amount lower than what they are thinking of asking for, whether they are rents or for sale.
The capital gain depends a lot on the area, the location and the amenities. And even if you get a very cheap property, in the end you will not be able to generate income if it is located in an area where there is no capital gain or the market cannot access the amount of money you propose. You will lose more money, unlike you decide to invest in an area with a guaranteed gain capital, thanks to all these external factors that we already mentioned.
Another factor that we highlight and that you have to take into account are pre-sales. There is no better way to guarantee your money than buying before, remember our example of the Riviera Maya and Tulum? Now imagine how much it will cost to buy a housing development once it is popular.
Acquiring properties in pre-sale is an excellent way to invest your money, since once the developments begin to acquire capital gain, your property will have more value than what it cost and you can adapt your income according to the costs of the area or decide to sell it to a higher price, or keep it to get more return.
So, if you’re wondering what is the best age to invest in real estate? It is better to start asking yourself; how can I start investing in real estate? And start making a plan so you can reach your goals and start creating a safe economic future for you.
The Local Planning Appeal Tribunal recently dismissed the appeal of the City council-approved zoning regulations for short-term rentals, so Toronto will soon have a different rental landscape.
“This is good news for Toronto residents and a step in the right direction when it comes to regulating short-term rentals and keeping our neighbourhoods liveable,” said Mayor John Tory in a release. “When we approved these regulations in 2017, we strived to strike a balance between letting people earn some extra income through Airbnb and others, but we also wanted to ensure that this did not have the effect of withdrawing potential units from the rental market. I have always believed our policy achieves the right balance which in this case falls more on the side of availability of affordable rental housing and the maintenance of reasonable peace and quiet in Toronto neighbourhoods and buildings.”
There are a few new rules that will be implemented soon. Short-term rental will be permitted across the city in all housing types, but only in principal residences (and both homeowners and tenants can participate). If you live in a secondary unit, you can rent out your home short-term, but only if the secondary unit is your primary residence.
You’ll be able to rent up to three bedrooms or your entire residence. If renting your entire home while you are away, you can do so for a maximum of 180 nights a year. If you are renting out any part of your home, you must register with the City and pay a $50 fee.
For companies like Airbnb, they will have to pay a one-time fee of $5,000 to the City, plus $1 for each night booked. This way, the city is benefitting from the success of a company that is leveraging local housing to make a profit.
There will also be a Municipal Accommodation Tax of 4% that you will have to pay on any short-term rentals less than 28 consecutive days. Companies like Airbnb will be able to volunteer to collect and pay the MAT on behalf of their users.
It seems like these changes will mostly impact the condo rental market. Most investors renting their condo units through companies like Airbnb are not renting out their principal residence; it’s usually a secondary residence. Without short-term rental income as an option, we could see a slight drop in investors in the new condo market. Fewer investors means less sales and more supply for end-users. This could result in price moderation or even a price drop in the pre-construction market.
We could also see some condo units hitting the resale market and long-term rental market, as investors look to other options to profit off their properties.
There will be a transition period as investors figure out what to do with their condo units, but in the long-run, this change seems to make sense in that it delivers more supply to the people who are living in the city, as opposed to just visiting.
When a series of tax and mortgage rules was introduced in Canada in 2016 to prevent a housing market bubble, activity slowed down significantly in the years that followed. Given the current circumstances, is it still viable to invest in property?
In a think piece in Macleans, market watcher Romana King said even with fears of a global recession, real estate is still a smart way to invest.
“For investors, the key to making strategically smart decisions is to consider the underlying economic factors that impact your investment,” she said.
King said the housing market could climb out of negative growth forecasts this year. Citing figures from the Canadian Real Estate Association, she said the national sales activity was on target to increase by 5% in 2019 and could expand further by 7.5% in 2020.
“Canada boasts strong population growth, and government budgetary decisions are acting as stimulants for the national housing market, all of which point to a healthy future for Canada’s real estate market,” she said.
Investing in real estate, however, is not without risks. For investors, it is crucial to know some strategies to lessen the potential risks, King said. The first is to be aware of additional debt. Investors must keep an eye on their credit scores and pay bills on time.
“Most investors will require a mortgage to purchase rental real estate. This can alter your debt ratios, which can impact whether or not you get the best mortgage or loan rates. Talk to an advisor before applying for new credit or renewing a current loan,” King said.
Another must-have strategy is budgeting. King said investors need to control how much they spend on maintenance and repairs to ensure that their rental properties are cash-flow positive.
“An investor needs to budget for a contingency fund. If the anticipated monthly rent covers all monthly expenses, including a repair fund, then the property is cash-flow positive, which is fundamental for a good investment,” she said.
Getting insurance could also mitigate the risks of catastrophic events.
“Virtually all insurance policies will cover a catastrophic loss of a building, but as a real estate investor, you must also consider the loss of income due to damage or destruction. A comprehensive rental policy will provide a landlord with income to replace lost rent at fair market value,” she said.
Overall, investors need to treat real estate investing as a business. Citing Edmonton-based investor Jim Yih, King said the key to successful real estate investing is positive cash flow, and not just the purchase price and the potential sale price.
Source; Canadian Real Estate Magazine – by Gerv Tacadena 12 Nov 2019
You’ve decided, for whatever reason, that you want to invest outside of your local area or state. Your next question is—where should I invest?
I’m going to offer you a list of things that you can consider when trying to figure out what market to invest in. These things are in no particular order, and some of them may not apply to you or your particular situation. My intention with each one is to give you something to think about and hopefully some ideas on where and how to start looking for a market that suits your investment needs.
Here we go!
Step #1: Narrow Down Your Market Options
First, if you are brand new to out-of-state investing and don’t have a clue where to start, your location choices are likely going to feel extremely overwhelming. I have two things for you to think about that will hopefully at least get you moving in some kind of direction.
Where do you have friends and family?
Are there any cities where you have friends or family who might be good assets to have on your “team” on the ground? I’m not necessarily saying go into business with your friends or family or make them an official part of the team. But if you already have ties to any particular cities, maybe take a little time to decide if any of those cities might be good ones to get started.
Even if your friends or family there aren’t part of your team, they may be able to occasionally drive by your property once you own it and tell you if anything crazy seems to be going on. It never hurts to have an extra set of trustworthy eyes on an investment property!
Where are other investors buying?
Thanks to technology and the internet (and websites like BiggerPockets!), you can easily and quickly network with other out-of-state investors. Ask people which markets they are buying in, and if they seem friendly and interested in chatting more, find out why they are buying in those markets.
Don’t struggle to reinvent the wheel when experienced investors are already out there succeeding with out-of-state properties. I did secretly throw a keyword in there—experienced. Don’t take just anyone’s word for what they claim to be a good city to invest in. But remember, you’re just trying to get a list started. You can dig into details later as you go along.
Start there. Make a list of the cities that come up when you consider those two things. Again, this isn’t your final list, but at least your list is much shorter now than it was when it had all 19,354 U.S. cities on it as investing options.
You may not have known you had a list of 19,354 cities on it, but if you were starting from scratch, the whole country was a possibility! That would have to be intimidating and overwhelming—and almost an impossible point to start from. Now you have a less intimidating starting point. Related:What Moving Out of State is Teaching Me About Remotely Managing Rentals
Step #2: Analyze Those Markets
So, you are looking at your list of some number of cities or major markets, and now your question is—how do I know a good city to invest in from a bad city?
In my mind, there are only two major questions I ask to determine whether I want to invest in a particular city:
Do the numbers work?
How likely am I going to be able to sustain those numbers?
If you don’t know what numbers I’m talking about, I’m talking about your returns. Returns (aka profits) can be generated in two major ways: cash flow and appreciation. This is at least true for rental properties.
If you are flipping out of state, some of this will not apply to you, and there are some slightly different considerations that you’ll need to incorporate into your analyses. You’re on your own, though, for those—I’ve never flipped, so I definitely shouldn’t be the one to tell you how to rock that method out.
Most likely, if you are wanting to invest out of state, you’re probably doing so because you want cash flow. Most of the investors who invest out of state do so because the numbers locally don’t pencil out. This is often the case in a lot of the bigger markets—Los Angeles, San Francisco, New York, etc.
And while those markets don’t usually pencil out for cash flow, they are the bigger players when it comes to appreciation. So, in thinking of anyone who lives there and wants to buy out of state, it’s probably because they want cash flow. See my logic?
Either way, let’s assume you are going after cash-flowing rental properties out of state because you can’t find cash flow locally. If that’s the case, the numbers need to work in the market you choose to invest in. Otherwise, what’s the point?
So, let’s think about the numbers. What kind of numbers do you need to understand when it comes to cash flow?
In addition to the equations in that article, a term you will want to be familiar with is “price-to-rent ratio.” This term compares the price of a property to how much rent it can collect. The reason these two things matter is because they will determine whether you can cash flow on the property or not.
As you saw in those cash flow equations, you need the rental income you collect on a property to surpass the expenses of buying and owning that property in order to have positive cash flow. If the expenses of buying and owning that property are higher than the rent you can collect from the property, you’re in a negative cash flow situation and losing money (on the cash flow front at least).
Knowing this term now, if someone asks you if you’re interested in a particular market for investing, your first question might be—how are the price-to-rent ratios there? What you’re ultimately asking here is—is there an option for cash flow in that particular city?
For instance, I can tell you that hands-down the price-to-rent ratios in Los Angeles are not supportive of cash flow. I can tell you that the price-to-rent ratios in Indianapolis are generally favorable for cash flow. In no way does that mean every property or every location within Indianapolis will cash flow, but it does mean there is an option for it—whereas in Los Angeles, there’s really no option for cash flow.
Now, let’s say a particular market has generally favorable price-to-rent ratios for cash flow.
Oh wait, I just heard you ask—how do I know if a market has favorable price-to-rent ratios? Great question.
The fastest way to find that out is to network with other investors. You can either ask other people where they are investing, which I already mentioned, or let’s say you have a family member in a particular city and you’re curious about whether or not you can cash flow there. Post in a BiggerPockets Forum and ask people if they have any knowledge of cash flow potential in said market.
Look for people investing there, and find out the best places for cash flow there. If all of that fails, start looking up properties and running those equations I taught you, and see if you’re coming out ahead on cash flow.
Let’s say a particular market has generally favorable price-to-rent ratios for cash flow. This is where that second question I asked comes in—how likely am I going to be able to sustain those numbers?
The answer to this question is lengthy, so I’ll just give you one basic thought to consider for now. Is the market you are looking at a growth market or a declining market? The reason this matters is because you can project cash flow numbers until the cows come home, but if certain factors come into play with your property, you may never see a single bit of that projected cash flow materialize.
Bad tenants, for example, can cause you to not see a penny of your projected flow because they can cost so much in expenses—IF they are even paying the rent.
Your list of potential markets should be even shorter now than it was when you narrowed it down from 19,354 cities to either cities you know people in or have ties to or cities other investors recommend. It should only include markets/cities where the numbers not only work but also where the numbers have good potential of sustaining themselves. (That last part is purely my own personal investment strategy preference—it’s certainly not a requirement.)
You may have one market on your list at this point, or you may have a handful. Which one you ultimately decide on may just come down to personal preference at this point—or it may depend on your situation and your resources.
At this point, here are a few more things you can look at.
You just might not have enough capital to invest in all of the good options out there. For instance, I know of some amazing deals in Baltimore and Philadelphia, but those particular deals require a minimum of $90,000 up front.
You may not have $90,000. You might only have $20,000. Well, good news—$20,000 can get you a great cash-flowing property in other cities!
So, for your budget, you may stay focused on one area over another. I used to work with triplexes in both Chicago and Philadelphia. At that time, you could get a good cash-flowing triplex in Philadelphia for $130,000. The triplexes in Chicago at the time were bigger and nicer, and they were around $270,000.
The cash flow on the Chicago properties was higher, of course, but not everyone’s budget would support buying one of those triplexes. But many of those people could get one of the Philadelphia properties. So, more than anything, your available capital may further limit you on where you can invest. This isn’t always the case, but it is a consideration.
This is simply a personal preference factor. For example, some markets like Philadelphia and Baltimore tend to have properties with more of an urban feel. They are often more of the row house-type of structure. Not everyone likes the urban feel, and not everyone likes adjoined buildings.
The other option would be properties with a suburban feel that are free-standing. You can find lots of these in the Midwest. Additionally, some markets offer a lot of multifamily (MFR) options, and some markets only have single-family (SFR) options that will cash flow. So, if you prefer urban or suburban over another, and if you prefer SFR or MFR over another, those personal preferences will steer you toward particular cities and away from others. Related:Forget the Demographics and Focus on Researching THIS Before Investing Out-of-Area
Look! You’re continuing to narrow down your list! Here’s how to further narrow it.
Returns vs. Risk
At the end of the day, some cities and property types will be more risky than others. Even if you are looking within stable growth markets and none of the areas you are looking in are majorly dangerous, some may have significantly better schools than others, etc.
Maybe one market is slightly more in a “gentrifying” stage than another more matured market. It’s always fine to take on a little more risk, but make sure the proposed returns are high enough to justify it. Or if you are more risk-adverse, you may choose to accept slightly lower returns in exchange for staying with a less risky market and property. That’s totally fine as well.
So, you want to have a feel for the returns versus the risk available to you in each potential market and weigh that against where you are on your own personal scale of desire. What’s more important to you: returns or playing it safer? That should help you further whittle down your list.
Ease of Commute
This one may be less significant than others, but it could play a role. If you have narrowed your list down to say, two markets, and those two markets are weighted pretty evenly against each other—which one is easier to get to? If a nonstop, not-too-lengthy flight is available to one and to get to the other would require a couple stops and a longer travel time (which would also probably be more expensive), go with the one you can get to easier!
Ultimately, the most important thing about whichever market you decide on is whether or not you will lose sleep over investing there. Maybe it’s because you can’t stomach your investment property being so far out of reach, maybe it’s because the market is a little riskier, maybe you hate single family homes and really wanted a multifamily. Whatever the situation, go with what will put a smile on your face (and hopefully some cash flow in your pocket).
A quick summary on the steps you can take to help you decide on a market:
Step 1: Narrow down your market options.
Where do you know people?
Where are other people investing?
Step 2: Analyze those market options to further narrow down your list.
Is it a good market to invest in?
Do the numbers work?
Will you be able to sustain the numbers?
Step 3: Choose what you like!
Decide on your personal preferences and see which markets fit those.
Then, once you have your market decided on, go shopping! Even if you only narrowed your list down to a couple of cities, that’s fine. Two cities is easier to shop in than 19,354.
And here’s one last tidbit for you. At the very end of it, no matter how or why you chose the market(s) you did, you need to confirm one last thing. Are you ready?
The last thing that matters is that you can form a good team in the market you choose.
If you can’t find good team members to help you with your property, go to another market. If you don’t have a solid team as an out-of-state investor, you’ll be up that famous creek without a paddle.
If you’ve narrowed your list down to a couple of cities you’d be willing to invest in, choose the one that offers the best team. If you’ve narrowed your list down to one city you want to invest in but then you can’t form a solid team of good people there, start over and choose a new market. You must have the team!
New York City’s reputation as one of Earth’s most expensive—and daunting—real estate markets is well-earned, thank you very much: $1.8 million studio apartments? Check. Full-cash offers everywhere you look? Check. Freakishly competitive open houses? You bet. Welcome to the big time—with the prices and killer views to match. It’s little wonder that housing is top of mind for just about all of the nearly 8.4 million folks who call the Center of the Universe home.
Everyone, it seems, is angling to hit the NYC trifecta: a decent space in a good neighborhood at an affordable price. That’s why it’s so important to get a handle of what’s going to be the next big neighborhood, before it explodes in popularity and prices get out of reach.
To find out which neighborhoods in this bellwether, nationally scrutinized market are seeing the biggest price climbs—and the biggest falls—we teamed up with real estate appraiser Jonathan Miller, co-founder of Miller Samuel. He compared the median home sale prices in all of New York City’s neighborhoods throughout the five boroughs in 2017 and 2018. We included only the neighborhoods with at least 25 sales in both years.
What we found is a city going through churn, much of it due to the flurry of luxury development in some areas that traditionally have had older—and more affordable—homes. Prices go up, an area gets saturated, the luxury stock sells out, then prices go back down. Rinse and repeat. Meanwhile, the megadevelopment causes people to search out nearby areas that might be cheaper.
It’s the NYC circle of life, and it’s accelerating.
“Developers have left no stone unturned and developed wherever they could,” says Miller. “They went everywhere there was an opportunity. And that caused a lot of price fluctuations, especially in more modestly priced neighborhoods that saw a lot of new, high-end development introduced.”
But New York City hasn’t been immune to national trends. The overall market is slowing throughout all of its five boroughs of Manhattan, Brooklyn, Queens, the Bronx, and “can’t-get-no-respect” Staten Island. The city has been particularly affected by the national tax changes that make it more expensive to own a home in pricier parts of the country, says Miller.
More fun still: This month, New York state’s new mansion tax went into effect, upping the amount of taxes on properties $2 million and up. Sales had been down earlier in the year, but the prospect of giving more to Uncle Sam resulted in a rush of higher-priced home sales. Going forward, the number of sales is expected to fall back down again. Phew … Dramamine, please.
High price tags are pushing many New Yorkers farther out into cheaper communities such as the Bronx, which doesn’t have the hipster cred or water views of Brooklyn. But dollars can stretch way further there.
“A large shift or decline [in a New York neighborhood] is generally not a reflection of weakness,” says Miller. “It’s more of a reflection of … now it’s back to business.”
So which neighborhoods are seeing the largest real estate price spikes? And which expensive communities are getting (a bit) more affordable?
Annual median price increase: 122.7% Median 2018 home price: $612,500
When folks think of the Bronx, the mix of grand Tudors, Georgian Revival estates, and midcentury modern homes and lovely winding streets in suburban Fieldston are rarely what come to mind. Homeowners in this privately owned enclave of tony Riverdale pay property taxes and fees to their property owners association, which maintains the streets and sewers and pays for its own security patrol.
Prices are surging because word has gotten out: Buyers are increasingly drawn to its seductive combo of urban and suburban living. The historically designated community is near top private schools, which include the Horace Mann School and Riverdale Country School. It’s also only steps away from the Hudson River and the 28-acre green oasis of Wave Hill Public Gardens in the northwest swath of the Bronx.
“In Fieldston, you are part of the city but you have the real suburban feeling,” says Chintan Trivedi, a licensed real estate broker with Re/Max In the City. “Here you’re getting a real home, a backyard and a private community.
“For a good house with a larger backyard, a complete renovation, and maybe a pool, you can expect to pay $1.5 million to $2.5 million,” he says. But there are six-bedroom homes listed in the $1 million range. Just tryto get that in Manhattan. (Spoiler: You can’t!)
Annual median price increase: 41.2% Median 2018 home price: $275,000
Just south of Fieldston are the middle-class communities of Kingsbridge and University Heights, where buyers can score deals for a fraction of the price. But the lack of homes for sale and little turnover are causing prices to heat up. And investors are buying up whatever lots and houses they can for new development or rehabbing.
“The Bronx is the new Queens in the sense that there’s been an expansion of demand moving out from Manhattan as consumers search for affordability,” says Miller.
The neighborhood’s become popular with 20- and 30-somethings looking for a reasonably priced community with an urban vibe. Hilly Kingsbridge is filled with century-old, single-family houses and midrise co-op and apartment buildings as well as plenty of shopping, parks, and public transit.
These buyers “are[part of] the new generation that’s learning that real estate should be part of their planning,” says Trivedi. “They want to feel like they’re in Manhattan—a place where they can still go right downstairs and get a smoothie.”
Annual median price increase: 38.7% Median 2018 home price: $1,535,000
Over the past couple of decades, lower Manhattan’s East Village has shed its image as a sketchy, open-air drug market to become a sought-after place known for lively bars, great restaurants, and a defiantly boho vibe—as well as a slew of new, high-priced developments, causing prices to jump. They’re going up everywhere you look.
Annual median price increase: 36.1% Median 2018 home price: $1,226,750
Like the East Village, Prospect Heights has been rapidly gentrifying. Professionals, families, and a few stray hipsters are drawn to its charming rows of stunningly restored early 19th-century, multistory brownstones on tree-lined streets. The neighborhood is near several main subway lines and in close proximity to the 526-acre Prospect Park and the Brooklyn Botanic Garden. It also borders Barclays Center, home to the NBA’s Brooklyn Nets (and soon the team’s new dynamic duo, superstars Kevin Durant and Kyrie Irving).
In recent years, Prospect Heights has become popular with folks priced out of neighboring Park Slope, a community long popular with upper-middle-class families. They gravitate to the brownstones as well as the new high-rises and the used bookstore, artisanal bakeries, and constant stream of new restaurants.
Not surprisingly, the Prospect Heights neighborhood has attracted a slew of developers putting up luxury condo and apartment buildings wherever they can. Those high-end housing developments are skewing the neighborhood’s median prices up to new heights.
This isn’t the kind of place where you’ll find buzzed-about restaurants—you’re more likely to stumble upon a dollar store than a bougie boutique. It’s a more down-to-earth community, populated by old-school Brooklynites, hipsters, as well as Pakistani, Orthodox and Hasidic Jew, Mexican, Chinese, and Latin American immigrant groups.
Annual median price increase: -40.7% Median 2018 home price: $915,500
Once grim downtown Brooklyn has been booming in recent years. It’s become home to a slew of glassy, luxury high-rises. So why are prices in such a vibrant area plummeting?
Well, now there’s a glut of new construction, giving buyers more negotiating power as buildings compete against one another to lure residents. Plus, builders are putting up towers with some smaller, less expensive units. But in NYC, less expensive is relative. Buyers might save themselves a couple hundred thousand on a million-plus-dollar condo.
But many of the condos here, some designed by famous architects, come with just about every amenity imaginable, including sun decks, hot tubs, dog runs, saltwater pools, and even music studios. This two-bedroom, 1.5-bathroom abode in a 57-floor building is going for $2,040,000.
Some believe developers overshot their market.
“Developers there created a mountain of homogenous product,” says agent Blumstein with the Corcoran Group. Buildings in the area “were built on the thought that people are demanding amenities. But the old-school, prewar neighborhood vibe is what’s in.”
Annual median price increase: -39.3% Median 2018 home price: $3,200,000
Even many lifelong New Yorkers have never heard of the Civic Center neighborhood in lower Manhattan. The tiny community encompasses City Hall and courthouses as well as some high-rise co-op, condo, and apartment buildings. It’s just west of ultradesirable Tribeca, where prices are sky-high, and just below Chinatown, guaranteeing plenty of good Asian eats.
Prices are down because the wave of development has pretty much played itself out, says Miller. Many of the older brick and limestone, midrise office buildings had been gut-rehabbed and turned into pricey condos. That led to a spike in prices. Now that those units have been bought, the real estate for sale is a mix of lower- and higher-end properties.
It’s “run its course,” says Miller of the wave of development in Civic Center.
Annual median price increase: -30.2% Median 2018 home price: $450,000
Like Civic Center, Javits Center as a neighborhood isn’t very well-known—but that’s likely to change. Named for the sprawling convention center on the west side of Manhattan where the community is located, it’s wedged between trendy Hell’s Kitchen and Chelsea and abuts Hudson Yards.
Even nonlocals have probably heard of Hudson Yards, Manhattan’s newest neighborhood, built on a formerly desolate stretch of disused train tracks. It’s a glam (and critics say overly generic) development of ultrahigh-priced condo and rental towers overlooking the Hudson River, complete with its own weird tourist attraction, the beehive-like Vessel. The Javits Center’s proximity to this buzzy development will likely have an impact on sales with prices shooting up.
But in the meantime, prices fell because there simply isn’t much of the first wave of luxury real estate left on the market. Now what’s selling is less expensive, older condos.
That’s likely to change as sales heat up in Hudson Yards.
“Sales [in Hudson Yards] will help to increase values in the surrounding area,” says New York real estate agent Matt Crouteau. The place “was designed so people don’t have to leave.” Ever.
Annual median price increase: -30% Median 2018 home price: $997,500
Just south of the Civic Center is the Financial District, home to Wall Street and the World Trade Center on the tip of Manhattan. Like all of the other neighborhoods on this list, FiDi (as it’s called) experienced a spike in development, then a market saturation.
“It’s not that prices are collapsing,” says Miller. “The early wave of high-end new development drove prices higher. … After that activity cooled, the prices for the neighborhood are less than what they were.”
But there are still plenty of new units to choose from, including this three-bedroom, four-bathroom condo going for $5,300,000. The unit features granite countertops, a waterfall island, high ceilings, and floor-to-ceiling windows. On the lower side of the spectrum, buyers can snag this studio with plenty of closet space for $480,000.
The neighborhood is home to a few cobblestone streets, giving it an old-world charm, as well as the South Street Seaport, a tourist fave.
Annual median price increase: -29.6% Median 2018 home price: $1,550,000
Thank the long-awaited Second Avenue Subway line for prices falling in the upper portion of the Upper East Side, from about 96th to 110th streets. Developers flooded the neighborhood putting up buildings near the new train extension, which opened in 2017 after being discussed, planned, and replanned for nearly a century. They believed—rightly so—that this least fashionable part of the Upper East Side would become far more desirable thanks to its close proximity to the new train line.
“That’s essentially East Harlem, which has benefited from a significant amount of new development,” says Miller. Now development is mostly over and there’s fewer sales.
“You’re not seeing the same amount of high-end [sales], because there’s not as much new housing being introduced,” he explains.
The Upper East Side/East Harlem now has a mix of sleek towers, brownstones, low-rise brick buildings and townhomes, and apartment and public housing developments. This new one-bedroom, one-bath condo clocking in at just 609 square feet, which is near the new subway line, is on the market for $786,161.