Manhattan Condo's as investments?

Great, a new topic.

It's tough to tell what any individual is thinking. However:

- A 10 year treasury bond is only yielding 3.4% right now.
- If you can pay in cash, you can undoubtedly rent the place for quite a bit more than carrying costs, possibly enough to cover a 3.4% yield.
- You DO have to pay the IRS taxes on interest earned from a treasury investment.
- Some people do feel like the market will climb again in Manhattan, and that we are still fairly near a low point in the market.

I am not sure about the last item there, but my fiancée does outright own a condo in Jersey City that we have no plans to sell-- the return from renting it out is yielding about 6-7% a year. Even if the price goes down (and she bought low), it's still a reasonable place for us to have some money... though obviously it's not nearly as liquid.

Everyone has their own circumstances. If you are buying an apartment for an investment you can deduct depreciation up to $25,000 a year against any profit or any income you receive from other means including your paycheck. If you happen to be a Real Estate Professional (not a Broker), there is no maximum to your depreciation up to your gross income amount.

Thanks CSN, I had no idea that you could deduct up to $ 25,000.00 per year on the apartment investment.
Is that an IRS rule or a state by state item? I didn't know apartments depreciate? That's part of the learning curve for me.

damier212 please note there are income limitations to the 25,000 deductable, please consult your tax advisors

The benefits of depreciation are limited. You pay 25% federal taxes on whatever you depreciate upon sale.

The real story here is that as long as people view the financials of ownership differently than those of investment (as you seem to be implying), why should an investor view it differently? After all, there will be a fool who will buy it from you down the road using ownership financials.

...down the road, there might be fewer fools who can afford to buy.

If you reasonably believe that the property won't be sold depreciation makes sense. At the margin it can definitely be a deciding factor. That said, I don't believe prices in Manhattan are low enough o justify a buy to let.

@csn - actually I'm fairly certain real estate professionals for depreciation purposes do include brokers! It's even easier to meet the qualifications of being a real estate professional if your primary job is real estate brokerage.

@damier212 are you a US citizen / permanent resident? If not, NYC is still a very friendly place amongst major world cities to buy, but you do have some special taxes on the way out: https://www.hauseit.com/buying-property-in-new-york-city-as-a-foreigner/ I would definitely do some research first before pulling the trigger if you're a foreigner.

@inonada what do you mean you have to pay 25% taxes on whatever you depreciate? Have never heard of this!

And yes, agree with the above that as a foreigner, they lure you in with equal treatment as domestic buyers, but then you get hit by FIRPTA etc. It's pretty nasty. Still, better than buying for over $4,000 PPSF in London and getting hit with up to 15% in stamp tax though!

In Manhattan, current cash-on-cash returns are sub-3% if I am not mistaken. And that's for all-cash purchases. If you leverage that purchase and account for all expenses such as income tax, withholding tax, capital improvements, rental expenses etc., you will need to rely on property appreciation in order to earn a positive return. In the current market, that means buyers will need a longer holding period to generate a positive return.

Of course, many foreign buyers are less interested in a positive return and more interested in parking some/much of their wealth in a "safe haven" like the US. Same rationale for those foreign buyers in London and other international cities. High stamp duty in London, Paris, etc. will require buyers to have longer hold periods.

you guys realize this thread is 6 years old

"@inonada what do you mean you have to pay 25% taxes on whatever you depreciate? Have never heard of this!"

Depreciation recapture:
http://www.investopedia.com/terms/d/depreciationrecapture.asp

"In Manhattan, current cash-on-cash returns are sub-3% if I am not mistaken."
I' seeing a lot of cases where it is sub-2%

Hi! I stumbled upon this article a couple of days ago. It was about the best parts of NYC one should invest in. From what I've learned, I can tell you that Manhattan is not the best borough for real estate investments at the moment. Rental yields there leave much to be desired. If you're interested, read it yourself - https://rentberry.com/blog/nyc-boroughs

Agree on doing research first. I was pretty shocked after reading that article you posted that there's no equivalent to stamp duty here in NYC. However, it seems like it's not exactly out of generosity as everyone knows about how famously Democratic the politicians are here in the city.

But what seems to really get you are the exit taxes, basically FIRPTA and the estate tax (this one is a killer, literally).

With sub 2% returns what is the point then? Aren't property taxes in NYC pretty high actually? Sometimes 1-2% even. If you're lucky, less than 1%. Thoughts?

I hear in Westchester they're even higher, like 2.5%. A friend's father's house there is $800k but has $20k of annual taxes. But the schools are so good, they're all basically private school quality. So at least you're getting something for it.