6 Tips for International Real Estate Investors Navigating the NYC Market
- By Bernard Klein December 2, 2016
As the global economy continues through a calendar year that’s been marked by volatility and uncertainty, it’s no surprise that many international investors are continuing to funnel their money into New York City real estate. Compared to real estate markets like Hong Kong, London and Moscow, real estate in New York City still feels affordable to international buyers.
Besides sheer affordability, several years of double-digit percentage appreciation and strong property ownership rights have made the city’s real estate market an attractive choice to international buyers looking for a strong return on their cash. Additionally, with the U.S. dollar reaching record highs compared to other global currencies like the euro and British pound, an investment in New York City real estate becomes an investment in the dollar, which is enabling investors to gain an even stronger return.
Here are several tips and considerations to begin navigating the New York City real estate market for international real estate investors.
1. Focus Your Search on Condos
When looking to purchase an apartment in New York City, condos and co-ops are a couple of property types that an international buyer may consider. While there are several exceptions, co-ops tend to have much higher restrictions for the types of buyers they consider as well as sublet policies. Given these restrictions, as an international real estate investor, one should focus their attention on the condo market.
Condos are liquid, can be bought and sold to anyone, and generally have non-restrictive rental policies. Additionally, condos can be purchased by legal entities. Since condominium apartments are a much more recent concept than co-ops, the condo inventory tends to include newer construction. Given the liquidity, condos average a higher price per square foot as compared to co-ops.
2. Consider Manhattan AND Brooklyn
Most international real estate investors will want to only focus on Manhattan real estate. While Manhattan condos are the bulk of what international buyers are purchasing, there’s also significant opportunity in Brooklyn. Over the past five years, the Brooklyn condo market has developed into highly sought-after inventory, both by residents and investors alike. On average, prices in Brooklyn will be cheaper than in Manhattan, although some neighborhoods in Brooklyn are already trading at premiums to certain neighborhoods in Manhattan. Rental values have continued increasing at record paces across Brooklyn, which is beneficial for investors who are looking to increase their yield.
3. Work With an Agent Who Represents You
Working with a real estate agent that helps you navigate the purchase process will be essential. A qualified buyer’s agent represents your interests and ensures that you’re aware of all the facts and protects you throughout the purchase. As an international buyer, you’ll also want someone who can aggressively negotiate the deal, inclusive of the pricing and other conditions.
Something that is incredibly important for an international buyer is to work with a real estate agent who will manage the property, making sure a tenant occupies it as soon as the property is purchased. This will ensure that the property is in good hands, while they enjoy the benefits of the rental return. A good real estate agent will also keep you updated on the overall state of the market, helping you decide when the time may be right to resell the property.
4. Be Prepared to Pay All Cash
Often times, it’s incredibly difficult for international buyers without visas or permanent residency to receive attractive financing options. One way to potentially receive favorable financing options involves using international banks that may be willing to provide a mortgage for an apartment in New York City. Also,
an investor may be able to finance the deal by putting down a significant amount of the purchase price, such as 50 percent down.
In many cases, international buyers need to be prepared to pay all cash when they buy their apartment. All cash offers are attractive to sellers, as they allow for quick closings. As a buyer, this allows for a degree of leverage that can also be used to drive down the price.
5. Consider New Development
International buyers favor many new development. In many cases, these properties have tax abatements, which is the result of a tax subsidy passed on to the buyer by the real estate developer. New developments also show well, which makes them easy to rent out and also resell in the future. These properties retain a cachet that older developments cannot replicate. New developments will command a high price per square foot relative to other properties on the market, but they’ll also command a high rental return and resale value. Some investors may even choose to enter into contract in the pre-construction phase of a development, keeping 10-20 percent of the property’s value parked in an escrow account for several years until the property is ready for purchase.
6. Work With a Real Estate Lawyer That Will Help You Structure Your Purchase
The last stage of a property purchase in New York City is the closing. To help closings to go smoothly, an international real estate investor will want to work with a real estate lawyer that will help them structure the deal to their benefit. A lawyer will work with you to ensure the appropriate legal entities are structured and set up to protect you from any risk and liabilities, while also helping you maximize your return. Often, a real estate lawyer may work in tandem with your accountant to ensure everything is set up to best suit your needs.
As an international real estate investor, you’ll have plenty of selection to choose from across the New York City real estate market. While the market is competitive, there are many options available to best suit your investment needs. Working with the right real estate agent will help you navigate New York City and will enable you to achieve your goals.