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Foreign Investment in NYC: Why Timing Isn’t Always Everything

Agent Insight, Buyers, Sellers // Aug 15, 2013

They say “Timing is everything”. When it comes to investing millions of dollars into real estate however, other factors, in addition to fortuitous timing, are also at play.  It requires an up-to-the-minute awareness of hyper-local trends one can understand and maintain only by being fully-immersed in the city’s real estate landscape, focusing on the forces and currents at work in this market.

adrian noriega

New York City real estate continues to be a solid choice for potential investors. Even at its height, the recession was far kinder to real estate in Manhattan than most other places throughout the country, with the city never experiencing the depths of misfortune witnessed by places like Miami, Las Vegas and other real estate investment targets for foreign money. With a recently introduced bill in the United States Congress seeking to lower the tax burden of profits made by foreign investment in U.S. properties, we may begin to see a flood of housing activity in the coming months.  With these facts in mind, the timing does seem to favor Manhattan investment.

Despite timing however, just because Manhattan is a hot market doesn’t mean all investment properties are created equal on this island of opportunity.   Real estate investment in New York City requires a keen sense of awareness of trends and dynamics that aren’t necessarily covered in the real estate section of newspapers or industry publications. These nuances can make the difference between middling and an excellent ROI.  A few of the subtle differences you may not have considered are listed below:

1) Better returns on luxury properties – One client of mine, a foreign investor with a budget of $6 million, intended to buy three properties Downtown, each around $2 million, thinking she would triple her chances of capturing growth potential on the market.  However, with the state of the current market, not only would her returns be eroded by the costs associated with managing three different properties, but she’d also have less upside upon resale compared to purchasing a trophy property. I suggested she would fare better buying one property Uptown in the Columbus Circle neighborhood for $6 million.  Other clients who have purchased single luxury properties report ROI at far greater levels without the extra management costs and hassles of resale listings.

2) Knowing where the hottest new properties are emerging – New development projects continue to experience unprecedented growth, apace with luxury buildings like 241 Fifth, One 57, 56 Leonard93 Worth, 432 Park and the Soori High Line hitting the market.  First introduced to brokers known to serve high-end buyers, we frequently learn about these premier properties before the project even breaks ground. Having someone with this type of exclusive access to new developments early on is vital.

3) Understanding local dynamics – Lingering doubt and insecurity in the wake of Hurricane Sandy has soured the investment appeal of downtown buildings for some, though many properties downtown are taking significant precautionary measures to avoid future issues. Sections of Harlem are thriving with plans of new developments, amidst plans for future economic growth by community leaders.  However, there are certain depressed areas that more than likely will not see any type of funding for growth and new development. Each neighborhood has its pros and cons and areas of potential growth, so it is highly recommended to have someone who can advise you before you decide to invest your money into a property.

With significant room for growth within luxury real estate, this niche market continues to remain strong and the timing has never been better to purchase for the sake of investment.  Given the nuances of the New York City real estate market, having the right representation is crucial when navigating the obvious as well as latent obstacles along the way.