Does investing in a Manhattan condo make sense?

It's over ... you missed it

Forgetting the financial aspects, do you really want to be a long distance landlord? Not the easiest thing in the world.

In order to break even you need to put down approximately 35-40% . After that, assuming your mortgage payments is locked, in the years to come , rents will climb faster than the taxes and common charges and you can expect small profits. In 15 years your place will probably be worth double.

Without the price increase assumption, you will lose money on buy and rent out. If you want to live in it, it is very different calculus.

BTW, buying to rent out has not been a trade in NYC for a long-long time. However, people who bought got very rich due to price appreciation.

Sir Dimtry. Don't forget to include your tax benefits into your monthly cashflow. Also every month your pricipal o/s loan balance drops by a percentage of your mortgage payment. If it's a 15 year loan then when you retire you will owe nothing!

Assuming 20% down and a purchase over $1mm, you will also end up with about 50K in closing costs, which includes the NYC mortgage tax and mansion tax.

steveF, Clearly, your principal payments should not count for your cost break-even. However, there is no income tax benefit if you rent out. In fact, your real estate taxes go up by 25% vs if you were to use it as your primary residence. In order to buy and rent out, you have to believe that prices are going up at least 3-4% every year which with 25% down give you 8-10% return every year if you do not plan to sell.

Admin2009 is correct; you've missed the window of opportunity to do this. I lived in a huge condo where some properties were in foreclosure around 2008 during the financial/mortgage crisis. Investors were snapping them up as rental properties, sometimes all cash deals.

No, it doesn't make sense at today's prices. For me to purchase my apt today, it would be 31x rent for a comparable apt. When I purchased in 2002, it was 14x. I think you need 15x or less to break even. When you're ready to move here, you can reevaluate the buy vs rent.

300mercer...i understand that your principal paydown is not part of monthly cashflow. However in the end your return skyrockets when you loan is paid off. Think about holding a million dollar apt and owe nothing against it. Also there without a doubt certainly is income tax benefits. Also,the best part is if Dmitry is going to move in afterwards he can avoid all capital gains tax.

if he chooses to sell and not move in his closing costs drop to like nothing if you eliminate the Traditional Broker and sell by FSBO Broker.

REMom....all beginner landlords suffer from negative cashflow however rents rise and if you are smart and have a fixed loan the rent increases more than offset the tax and CC increases. If he can handle the initial negative cashflow for a few years then his cashflow will turn positive. All the while just like stocks history says real estate appreciation will happen and your loan gets smaller and smaller(amortized) with each mortgage payment

1. you can still buy in NYC with PCF
2. and are foolish if you don't because rent and equity increases don't always happen

3. and are far less certain now than they were in 2009-2010

Intermediate and longer term landlords can also suffer from negative cash flow. Like all of real estate, this can be a hard business. One guru points out you must be willing to evict people or you just can't do this successfully as an investor. Sometimes nice middle or upper middle class people stop paying rent too btw, it's not just a section 8 problem. You need to have the stomach for this, and I found out I don't.

Flutistic...as u say nothing is more important than quality of tenant. You must do as thorough a check as possible on the individual/s. Good tenants are out there and once u get one hold on to them for as long as possible.

Dmitry..what do u think sir?

Dimitry..remember also there is no end in sight to the lower end inventory shortage. Developers cannot make any money building lower end condos. They need the very high end square footage prices to justify building and land costs. It is what it is. Demand is always there and compared to other Asian/European cities Manhattan is way behind as far as apt pricing is concerned.

NYC peaked last spring , and if rates move by a lot , 3-5 hikes , it's a disaster

JJ2....How many times do the uniformed need to realize that a rising rate environment goes hand in hand with a strengthening economy which means rising wages which more than offset your interest rate related higher mortgage payment. The best is the word "disaster" was used. Sir, you must be a short seller. Only shorts use the word disaster.

We did peak but the rates are irrelevant. Theoretically, rising rates for a good economy - absolutely. But here in Manhattan, big yawn, rates are not a primary driver one way or another. Maybe in Queens.

Lads and ladies, many thanks for your thoughts and opinions!
I have reread this thread a couple of times, and it seems that some of you still see Manhattan a sa a viable lower end condo purchase opportunity. I am not even sure a bank would write a loan on a $600k apartment with a montly note of $3,500 , which would include common charges/taxes/other obligations, and that is only producing $2000 in monthly rent. Plus, I don't see anything in that price rang in all of downtown, from Nolita to the north end of Chelsea. We could buy for that amount in uptown, but we wouldn't want to live there.

Rates are relevant to investment properties - even if paid for in cash - because they increase the rate of return of competing investments.

SteveF - - - you must a broker , bullish always , looking for rainbows and unicorns ... it's" uninformed" , btw

I agree with everything you say, Steve. One thing no one has mentioned tho is that Dmitry is asking about a condo unit specifically. New York State is unique in the USA in its underlying legal situation regarding condos. I personally think NYS is the riskiest place in the country to buy a condo unit for this reason. So one thing, I hope Dmitry has deep pockets and could weather something like a steep drop in the unit's price psf, or a situation where so many units are being rented that conventional lenders won't do mortgages, therefore the unit becomes unsellable, at least temporarily. Another big risk is a rogue condo board. As an investor you will probably not be allowed to serve on the board even if you wanted to. People often worry about heavy handed boards but a lax board doing illegal stuff is no picnic either. So, Dmitry, if I were you I would read the bylaws myself before signing anything, don't leave it up to your lawyer. But then if I were you I'd buy a single family house or a duplex, or two, in Queens or Long Island, and let glamorous Manhattan go.

It probably doesn't make sense to invest in a condo at this point. The price appreciation over the last 7 years has been tremendous, and it is starting to level off. Better off with a diversified portfolio I would say.

9d8b whatever...what is starting to level off? i love how people just throw out these big headlines with absolutely nothing to back it up. Any data or reasons sir? First of all prices for the lower end studio/one bedroom is most likely to move higher since inventory in that segment is down about 10% yoy from already extremely depressed levels. So how in all sense can anything level off when there is no supply? Demand has never been an issue for Manhattan only supply. Now we have no supply so what does that do? Causes more people to compete and spend more to get it. So the fact that Manhattan has had a lenghthy runnup in prices is irrelevant. There is still nothing on the horizon to stop the price appreciation.

Admin2009 broker?..please read some of my prior posts I am about as anti broker as you can get. I'm a FSBO Broker advocate. Rainbows and unicorns? man have I heard that one before all the way through "the world is ending!" nonsense of 2008-2009

Flutistic, thank you for your thoughtful comments. I'm definitely not moving to Queens. No siree...
And sadly, no, I don't have deep pockets. Going over the listings here on SE, looks like I'm not getting into a donwtown condo any time soon, either. Unless we do manage to find a coop with condo rules, that will allow subletting from the start. Just a little worried about losing a big chunk of my 401k in the last few weeks as well. What the heck is going on here..

condo prices + 21% 2015 vs 2014 , Manhattan looks great !!!!! Buy buy buy

Too bad for the 20,000,000 more people on food stamps than 2008 , they're world ended 7 years ago

callahan, what about the people starving in Ethopia? I bet they can't rent a Gulfstream.

you're right FC . . . . . . . that makes it even worse , thanks for the insight

I think Steve is right about everything.....but the question is, does his insight benefit your particular situation. A 1%er like Steve can do things financially a 99%er probably should not do--there are always exceptions, but. So I could afford to play around investing in rental real estate for a few years, win some lose some, it's all in good fun. More worried about feeding my considerable ego than anything else. But if you're talking keeping the kids in shoes, well that's something else. I believe all real estate investors need to keep considerable cash on hand to do massive repairs if needed, at the drop of a hat. Or else you've got to have a very good loan source at hand. Because unexpected things happen. Like my co-worker who got hit with a $100,000 assessment on her TriBeCa condo which she absolutely did not have the cash to pay. Her experience points out, by the way, that if you're hell bent for election to invest anyway, a larger building (60+ units) spreads the risk around much better.

I don't like co-ops for investors because your a signature away from losing your right to rent it out, no matter what they say when you buy.

What's happening with your 401K, and mine, is unsurprising. If you're decades away from retirement it's a big yawn....or actually a buying opportunity if you can.

Whatever you do, don't buy a coop apartment as an investment. A condo? Only if you can afford to carry the property without tenants and you can put money into repairs and painting and cleaning, etc., etc., etc., which people often ignore when they talk about buying an apartment. "Oh, it will pay for itself..........." No. It will not.

Flutistic and lowery are providing solid advice on the topic of risk. It's fairly common for Manhattan Condo's to hold large special assessments payable over very short periods - so you may need access to lots of cash post purchase. That said, investing in a condo in NY is not necessarily an easy investment for most people.

A number of posters have already said it succinctly, and others have provided more detailed answers. I hereby add a plus one to the just "No" group.