Considering to buy a studio or 1 bedroom in NYC to rent out as an invesment....any thoughts on how these have played out in the past?

Asked by Pshah, New York, NY Sun Aug 15, 2010

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First Last, , 90002
Mon Sep 6, 2010
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
kharby@crrnyc.com
0 votes
David Dorfman, Agent, Neptune, NJ
Sat Sep 4, 2010
This part is always scary:

"........, but have significant potential for capital appreciation."

Ask why they think that and if so, if they want to be a partner and share in the weath..."


Ask time frames, how much etc.

Current cash flow is great. Based on what? YOUR down payment?

How solid are the tenants. If the vacates, can you get more rent? IF the tenant vacates, how easy is it to get another tenant - AT WHAT RENT - more or less than the current tenant??
0 votes
Brett Comeaux, Agent, New York, NY
Thu Sep 2, 2010
With occupancy rates in NYC as high as 99%, this is a very good time to invest. The days of buying and holding a condo as an investment in NYC are over, however today's strategy should be based on a combination of cash flow and capital appreciation potential.

Most condos in New York carry high common charges and taxes. Combined with a mortgage, you will usually be left in a situation where your monthly expenses exceed the market-based rent for the same property.

We help buyers find properties with low expenses in up and coming neighborhoods that not only earn a current cash yield on your money, but have significant potential for capital appreciation.

If you would like to discuss feel free to call me at 212-545-0729 or email me at dlee@lgfairmont.com
0 votes
Bestplace2mo…, , Kingston, NY
Thu Aug 19, 2010
If it'sa coop just make sure the board rules allow continuous rentals (lots don't and require some owner occupancy) and if the math works in terms of the cost of the property, cost of the loan and the income potential the only other thing to consider is how long you are willing to hold on to the property. There are no guarantees obviously, but I personally made a significant amount of money on a 1 bed pre war apartment in NYC that I lived in first and then rented out for 5 years.

Good luck
0 votes
Ralph Windsc…, Agent, Hauppauge, NY
Mon Aug 16, 2010
Pshah:
Any time you rent out an apartment, coop, condo, or house, you take on the possibility of tenant non-payment of rent. Keeping this in mind, if you get a good property at the right price, in any location, and can rent it out successfully over the long term, this type of investment can be very good. If you're not currently represented by buyer's agent in the potential purchase, I would welcome an opportunity to speak with you.

Ralph Windschuh
Certified Buyer Representative
Senior Real Estate Specialist
Associate Broker
Century 21 Princeton Properties
631-467-0009
rwindschuh@c21princetonproperties.com
In The Top 2% of Century 21 Agents Nationwide!
0 votes
Deborah Madey, Agent, Brick, NJ
Sun Aug 15, 2010
Some coops can be rented but often require an owner occupant for a certain amount of time first. Even though prices have fallen, it can still be difficult to have a positive cash flow. Now is the time, however, with rates at these incredible lows.
0 votes
Sami, , New York, NY
Sun Aug 15, 2010
Hi Pshah,

The right apartments usually play out pretty good. Knowledge is key here in the selection process. There's many variables to consider especially as an income property. Chose the right agent and you'll do fine.

Sami

917-767-7248
0 votes
Natalie Levi…, , New York, NY
Sun Aug 15, 2010
Hi Pshah,

With mortgage rates at a 50 year LOW, now is the best time to buy. There are many great investment options throughout Manhattan for you to consider. Please give me a call at your convenience and we can discuss this further. I have access to all of the best investment and residential listings in Manhattan and would be happy to share them with you.

Best,
Natalie Levine
Corcoran
646.645.8253
0 votes
Jenet Levy, Agent, New York, NY
Sun Aug 15, 2010
Pshah,
You would need to purchase a condo rather than a co-op. Co-ops are expected to be owner-occupied, and though the sublet policy varies from building to building, this is not the right vehicle for your plans. When you purchase a condo, however, you are free to rent it out from the start. Your best bet would be to work with a very good agent who can work with you in buying the property and then a find a suitable renter for you.

Best,
Jenet Levy
Halstead Property, LLC
jlevy@halstead.com
212 380-4268
http://jenetlevy.halstead.com
0 votes
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