There’s something special about New York City. For some, it’s the buildings; for others, the rush of people. But as an investor, I’ve always loved the sense of opportunity. Anything seems possible here. Take NYC’s housing market, for example—prices continue to soar despite rumors of a recession.
I guess the saying is true: New York real estate is always a good investment.
Still, over the past 10 years, I’ve learned the hard way that some real estate investment opportunities in NYC are better than others. That’s why I’ve researched the top three real estate investment sectors—luxury, multi-family, and single-family—to determine the state of each as we head into 2023.
Here’s what I found.
Is NYC Real Estate Still a Good Investment Opportunity?
While a recession looms on the horizon, New York continues to lead the pack in virtually every metric. Bullish investors will find this incredibly encouraging, but bearish ones might not. Whatever your appetite for risk, however, investment opportunities continue to abound in the Big Apple.
If you already have a rental property under your belt, you should have no problem finding suitable tenants in NYC. Vacancy rates in the city remain quite low, so competition among renters for your property is high. And the average monthly rent for a one-bedroom apartment in New York rose again. Even with the recent dip in sales prices that some parts of the city like Manhattan have experienced, the overall value of your investment has probably increased. As of 2022, the median sales price in NYC was $767,000.
That’s all well and good, of course, but many new investors will wonder how they can even get a foot on the New York City property ladder, or if real estate investment opportunities in NYC even exist. Manhattan apartment prices hit $1.3 million in 2022—up by more than 7% year-over-year. Some Brooklyn neighborhoods have actually seen prices hit record highs. Translation: You need a solid NYC hard money lender to secure properties of those values.
This is despite a modest 5.7% increase in median home sales prices across the city in the last 12 months. That means there are areas in NYC that are still within your pocketbook’s reach—and have the potential to provide good returns.
Though the mortgage rates we’ve been used to seeing for the last several years are increasing, they’re still low enough to make purchasing a New York City property a good and relatively affordable investment. If house prices continue to rise for the foreseeable future, it can provide a nice equity cushion.
But keep in mind that rates are slated to go up throughout 2023. So the sooner you buy, the better your potential returns may be.
The Best Real Estate Investment Opportunities in NYC in 2023
How Are the Different Housing Market Sectors Faring?
Luxury properties show signs of opportunities for a certain type of investment strategy as we move towards the new year. Swelling inventories and decreasing demand are resulting in lower sales prices, so you may be able to buy at a lower-than-typical price right now. But these investments aren’t for everyone.
What the numbers say:
A global slowdown in the luxury property market is creating opportunities for investors to pick up properties for millions less than their original asking prices.
Manhattan has seen an increase in condo sales prices ranging from 2.4% to 11.2% with 1-bedroom condos seeing a 2.4% increase and 5+ bedroom condos seeing an 11.2% increase.
Manhattan’s median sold price increased slightly more than New York’s at 7.7% year-over-year compared to 5.7% year-over-year.
There are currently more properties available than there were last year; the number of homes for sale went up about 4%.
New York—and Manhattan in particular—still dwarfs every other city in the country when it comes to sales prices per square foot. For example, the average price per square foot in Manhattan is $1,447. That’s astronomical even when compared to New York City, which is at $645 per square foot.
My verdict:
High interest rates have stalled price hikes, but property values are still somehow holding strong. If you have cash to burn, it’s easier to pick up an NYC condo at listing price now, but few people have the millions to spend. It’s a great investment if you’re already well-off.
Multi-family apartments in Manhattan can be as prohibitively expensive as buying luxury apartments. But that doesn’t mean you can’t find value in the other boroughs, or that it’s a bad investment.
What the numbers say:
Rates in Manhattan remain high, landing at a $4,792 average in September of 2022. Year after year, the price for a non-doorman studio increased by 17.71%.
Actual sales activity has been falling. According to Rocket Homes, sales went down by over 20% from August through September. This is likely because of high interest rates—something a cash buyer may not need to worry about.
Prices in Manhattan still vary significantly by doorman. You can save nearly $1,000 on average by renting a location that does not have one.
My verdict:
Although the New York City market may be testing renters, its property values are also soaring sky-high. Rent prices keep increasing in NYC and it seems as though the market can bear it. Still, the high property values will make maintaining NYC rentals both difficult and tumultuous. A nosedive in rental prices could easily leave a landlord with a mortgage holding the bag.
That being said, there are a couple of investment tricks to make this kind of investment more affordable. I know multiple investors, for instance, who have moved their families to the top floor of their own multi-family properties. In Doing so, they treat the building as their primary residence. Not only does this mean that they can sell their existing family home in order to raise funds for the purchase, but they also qualify for lower mortgage rates since the home isn’t purely an investment. But this level of commitment might not be suitable for every investor. It’s a strategy referred to as “house hacking.”
Single-family homes in New York make for an interesting proposition. While the market is cooling, we see pockets of opportunity appearing. It’s knowing how to find them that becomes the problem.
What the numbers say:
Property prices have risen in each of the five boroughs since the housing crash, but at varying speeds and not without a few hiccups. In recent months, they have slowed due to the higher interest rates.
The availability of affordable and mid-priced properties increased again last year, representing a larger share of the market. This is good news for investors who find buying residential property in the $5 million range a bit of a stretch.
Home foreclosures are increasing again now that there isn’t a moratorium on them, particularly in Queens. In Q2 of 2022, foreclosures spiked by 147% across NYC.
A single-family home rents for around $3,412 in NYC—if you can find one. Single-family inventory tends to be hard to come by.
My verdict:
Signs suggest that the New York housing market is slowing down, but it isn’t losing value. It’s hard to predict what will happen during the rate crunch, but average rents have been holding steady.
In my opinion, buying, rehabbing, and selling distressed properties is a more interesting—and perhaps safer—option. If foreclosure rates continue on their upward trend, distressed properties can offer tremendous value and a potentially significant return on investment. And the shorter investment life cycle provides more certainty as you’re less likely to experience overwhelming market volatility. Distressed properties may be sold at a fraction of their original value and are a solid option for virtually any investor—as long as you have the leads to find fixer-uppers.
A Better Way To Find Real Estate Investment Opportunities in NYC for 2023
For 2023, distressed properties appear to be the best real estate investment opportunities in NYC for investors—but only if you can find one. Becoming an independently owned and operated HomeVestors® franchise owner was a game changer for me in this respect.
By leveraging some of the best marketing tools and the nationally recognized “We Buy Ugly Houses®” brand, I suddenly had distressed property owners coming directly to me. Because I bought directly from the sellers, I didn’t have to comb through dozens of online resources and the homeowners didn’t have to experience the stress of foreclosures. It’s a win-win for both of us. Naturally, not all of these opportunities will be suitable, but the ValueChek® tool from HomeVestors® allowed me to quickly determine whether a property had potential and make an offer on the spot. I’m all set up to take advantage of the distressed property market in 2023. Are you?
If you need help finding and closing real estate investment opportunities in NYC, get in touch with HomeVestors® today.
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