I am looking at rent stabilized investments in Manhattan. Does anyone have any insights? Maybe someone who owns an investment property?
I have heard that the new rules are problematic. I am aware of the limited rental increases (1-2% lately), but I was wondering whether there is anything else to consider? A property manager also mentioned that the new 2019 requirements are taxing from a management point of view. Any thoughts?
I am looking at 6% cap rates, is the added return worth the trouble?
Real Estate Agent · New York City · Member since 2020 · 818 posts · 639 votes
5y
@Cristiano Bell as you may know cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx.
6% in Manhattan is an incredible deal! Although rental increases are tough (the destabilization game has been played out and beat to death) never has there been a time in recent memory when you can actually cover debt and cash flow in Manhattan.
Today nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise.
Long term, I think NYC will come back as it always has time and time again. I am also a great believer in investing when there is distress and deploying capital when you can.
If you are looking for yield in the short run, Manhattan may not be for you. However, it is certainly the most attractive it has been in years from a cash flow perspective. If you are seeking out asset accumulation and equityappreciation over the long term then there are certainly fortunes to be made.
@Cristiano Bell as you may know cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx.
6% in Manhattan is an incredible deal! Although rental increases are tough (the destabilization game has been played out and beat to death) never has there been a time in recent memory when you can actually cover debt and cash flow in Manhattan.
Today nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise.
Long term, I think NYC will come back as it always has time and time again. I am also a great believer in investing when there is distress and deploying capital when you can.
If you are looking for yield in the short run, Manhattan may not be for you. However, it is certainly the most attractive it has been in years from a cash flow perspective. If you are seeking out asset accumulation and equityappreciation over the long term then there are certainly fortunes to be made.
Thank you for your comment Alexander. That is exactly my thinking. So you think that 6% is good for rent stabilized or for free market (I haven't found anything above 4.5% free market in decent areas)?
And anything else to worry about rent stabilized apart from the limited upside?
Investor · Staten Island, NY · Member since 2015 · 27 posts · 3 votes
5y
I have a nice 7 unit SRO building in NYC(state island), I waiting for city certificate to restore it to original 10 Unit SRO, but during this pandemic, city has been very slow. I am thinking about putting it on the market for around 1.1 to 1.2 million, currently it can bring $7000, to $8000 in cash and taxes are very low, so it will be over 6% return. If you are interested, you can DM me.
Real Estate Agent · New York City, NY · Member since 2018 · 16 posts · 11 votes
5y
@Cristiano Bell I work in NYC (more specifically Uptown Manhattan) as a landlord's agent and many times I come across landlords that own rent-stabilized multi-family buildings. The new rules are absolutely problematic when it comes to rental increases, but more times than not, the owners are more strict on their requirements for a prospective tenant. They may even warehouse vacancies in some cases. (COVID shifted some of this mentality because of our 5% "realized" vacancy rate, estimated 20% shadow inventory off-market)
When I look at NYC as an investment, I see holding for the long term with negligible cap rates. 6-7% cap rate sounds around where you want to be so if such an opportunity is presented to you, run with it!
Things may seem grim now and I may be biased but as a New Yorker, I have faith in the recovery. The matter of "when" is what I'm looking forward to