1 bedroom investment costs

No

I was told 4 years ago that to buy in Manhattan the best you could do was break even. The only place you could "make" any money was on your taxes through depreciation. I have found this to be true on my condo purchases. Even with the drop in prices the rents have also dropped so it is about the same. If you want to be profitable you would have to put down a minimum of 35-40%.

csn-

can you provide an example of a 1 bedroom property in manhattan where 35%-40% or even 50% down would yield a profit? (after paying mortgage, taxes, and maitanance)

WestVillageSeller, here are a few that would work. 40% down, 5% mortgage. And of course these prices can be negotiated. If you go to 50% down it opens up another area. I have just recently found a few others that look far better than these but I am looking at them myself.

http://streeteasy.com/nyc/sale/559378-condo-225-east-34th-street-murray-hill-new-york
http://streeteasy.com/nyc/sale/555617-condo-303-east-60th-street-lenox-hill-new-york
http://streeteasy.com/nyc/sale/563931-condo-39-east-29th-street-midtown-south-new-york

Thanks CSN. What rental income would you say each unit can get?

$3700
$3600
$4400

Assuming you get the 1st unit for $785K (40% down w/ 5% mortgage, your expenses (mortgage, tazex, maint) would be 3400 per month. Renting it out for $3700/mo would give you a $300 profit per month. Wouldn't it make more sense to keep your 40% or $315K in a savings account earning 1.15% (or the same $300/per month). in savings account, your balance and interest is guaranteed. With rentals, you run the risk of unexpected repairs or loss of rental income if unit sits empty.

On the other hand though, investing in the property could have upside if value appreciates, and I assume there is a depreciation/business tax benfit as well.

Am I looking at this the right way? I'm new to this, and feel like I am missing something. In this market, is it worth it?

WestVillageSeller I think another plus that in 30 years you would own the apartment and have a greater return on your initial investment

CSN with the first and the third are you not concerned with the tax abatement going away in 10/14 years ? That would be my concern with these units.

"another plus that in 30 years you would own the apartment and have a greater return on your initial investment"

What will be the re tax for the 1st unit 10yrs, 15yrs, 20yrs from now? Will rent inflation cover the unabated re tax and maintenance increases? Amount of interest payments also goes down, reducing tax benefit.

Of course there's the risk of a xx% drop...

The projected rents also seem a bit high to me. $4400 for a small one bedroom in a "B+" (at best) neighborhood? Even with the finishes, I'd say that's pushing it.

I agree with Lad. Murray Hill 1br is no more that $3250.

You all have made good comments.
WestVillageSeller,If you are looking at this as investment these properties give you a profit which is what you had inquired about. The depreciation on these properties is about $25,000 which reduces your income and therefore lowers your taxes.

neeta & Sunday, the tax abatement is always a concern. There are properties out there that will fit the parameters that do not have the abatements. I am comfortable that as the abatements are decreased the rents will increase.

lad, you may be correct except these are real rents in these buildings. In fact all the numbers I have used for the interest rate and the rents are all on the side of caution. In 2007 before the crunch in the RE market in Manhattan, this property would have rented easily for $5400 a month.

Here is another idea. Finance the property with a 5 year ARM, Interest Only (or 7-10 year if the rates are OK) at 4% and 40% down. This is what happens. Your monthly payment of interest, tax and maintenance is $2924 a month. You take the $1400 a month credit over the rent figure and you pay down the principal each month. What this does is it lowers you interest charge you pay monthly immediately. With fully amortized mortgage the extra principal payments only shortens the length of the mortgage. This gives you the saving each time you pay the additional principal. And since the interest charge drops each month, a little extra goes toward the principal each month. And then there is the depreciation. You can deduct $25,000 a year against your income (actual depreciation is $39,500 a year but there are IRS restrictions) which in the 28% bracket would be a savings of $7,000 a year. Now the accountants will tell you that when you sell the property the good old IRS will recapture the depreciation. This is true but you are hoping that when you sell the property that it will be up in value. Why else would you do this anyway! And by the way this property could be had for a 5-10% discount which would of course make all these figures look even better.

>I agree with Lad. Murray Hill 1br is no more that $3250.

I agree with Lad, but I go with $3800 on that.

>In 2007 before the crunch in the RE market in Manhattan, this property would have rented easily for $5400 a month.

No

csn, for the next 5-7 years, what is the average rent and price increase per year you are hoping for? Also, what do you think the interest rate would be in 5-7 years? It just seems like you have to be a real optimist to buy something in nyc as an investment property.

Average rent increases I see as 3-7% per year for the next few years. Interest rates are tricky since even the experts have no consensus. What I see are low interest rates for the next year or two and then steadily rising rate albeit slowly. Then I see interest rate rising quickly to 8-10%. I also see rents increasing since more people in NYC will be prices out of purchasing and will have to rent. Things going downhill in the buyers market will be a plus for the investor/landlord.

Here is another one that would work. Good area, walk-up, may need some work. Should be able to purchase at $400,000.

http://streeteasy.com/nyc/sale/600918-rental-203-spring-st-soho-new-york?email=true

csn, how would you consider the closing cost? it is at least 3% for the buyer and another 5% if we sell. Still possible to breakeven? thanks