I own a couple of houses and multi-family houses (not in New York City) that I rent out as investments. The numbers in New York City do not work as well as in other areas, it's hard to make a substantial profit. But many investors are happy with a small profit because they plan to use the apartment themselves someday, such as when they retire, or their time horizon for resale is long term.
In New York City you have the problem of what happens if your tenant simply stops paying rent. Going to court is expensive, time-consuming and it takes a long time for a judgment. Contrary to popular belief, deadbeat tenants can and do get evicted, but it's not quick or easy.
I personally know a grad student who stopped paying rent because he was so short of cash, so he lived in the apartment for 7 months rent-free, and then he moved to Georgia. It's hard to recover back rent from somebody like that.
Obviously, tenant selection is key to success, along with deep enough pockets so this investment isn't something you are dependent upon to pay your own living expenses. Professional property managers must be real estate licensees and good ones know how to screen tenants. You can also hire services to do screening and this is something you might want to seriously consider if you plan to manage this yourself.
I agree that you should only consider condos. What you're looking for is the combination of high rents/rental demand and relatively low purchase prices. In Brooklyn I think Prospect Heights and nearby is especially promising. In Manhattan, believe it or not I think the Upper East Side has a lot of undervalued apartments, especially in Yorkville, and the rental demand remains high. Harlem also has some wonderful well-priced condos. By contrast, prime Upper West Side has high rental demand, but the prices to purchase there are also high.
A one bedroom would rent much easier than a studio, but depending on your budget, you might make this work with a studio. If possible I would go with a one bedroom, however, to keep your vacancy rate as low as possible.
Also, you might want to consider purchasing an apartment with a tenant in place. These come to my attention from time to time, the advantage is you already have a tenant and you can insist on seeing evidence that the tenant is paying rent, which is called "rent rolls." Ask to see rent rolls before you sign a contract, not after.
If you're taking out a loan to purchase this property, remember you won't be able to get the same low interest rate as someone who is buying to purchase their primary residence, so be sure to consider this as you analyze the numbers.
Karla Harby, VP
Charles Rutenberg Realty
Manhattan and Brooklyn