Many people who would like to invest in New York Real Estate but don’t have $1,000,000 lying around believe investing in a Manhattan apartment a) costs too much b) won’t rent easily with co-op sub-let restrictions. Well that is in part true but did you know that there are in fact some co-op buildings which permit sub-letting on a level that’s easier than others? Also, while the average apartment in Manhattan at the end of the 2nd Quarter of 2011 cost approximately $1.45 Million, there are in fact apartments for sale right now for $250,000 or under. In Manhattan. And I’m not speaking about Inwood or all the way uptown. I am speaking about right in the heart of midtown.

75% of Manhattan residential inventory (or therabouts) is for rent. Only approximately 25% is for sale. A lot of people rent in New York. Why? Well many people move here to get started in their careers or take a job here as a spring board to a higher paying job elsewhere, so they don’t necessarily want to buy a starter apartment, even if they can. Which means they rent. Sometimes someone just needs a place to crash during the week – an attorney who works late nights but who lives up in Westchester. So they rent.

Looking at the rental market right now different firms give different vacancy numbers but the latest number I heard on Friday was that local residential vacancy in Manhattan rentals right now is about 0.8%! For anyone that left the city in late 2008 or early 2009 that is just moving back, they are coming back to a completely changed and highly competitive rental environment. Studios are going for $1,800 to $3,000+/month. 1 Bedrooms go from mid $2,000s to over $6,000 per month. I have a one bedroom unit on the market at 22 West 15th Street for 4,100/month and it has received multiple offers in under three weeks.

So let’s say you only have $50,000 sitting around. How much is it earning you right now in the bank or in equities? 0? 1/2%? Minus 3%? What if you were to find a studio for $225,000 and took that cash out of the bank and put it into this unit as a down payment. Then you finance, perhaps at todays super low rates for about $900 per month. Then add $600 or so for maintenance, just to be sure given rising costs. So your outlay a month is about $1,500? Ok push that up an extra $100 to be safe. Well, there are straight studios renting right now for $1,900 per month in Manhattan that are in doorman buildings, and have neighboring units on the market at this price point for sale! $1,900 minus 1,600 is $300 per month or $3,600 per year. That’s a 7% return on your $50,000 that’s earning you virtually nothing in the bank. Many would call that a winning investment, right?

What if you had $100,000 and had two of these units in your portfolio? What would your future income stream look like and how would the equity growth (Manhattan real estate does go up decade to decade) add to your return? I think there are hidden investment opportunities in Manhattan real estate right now. Whether you’ve got $50,000 to invest in a Manhattan apartment or $ 2,000,000 plus, contact me and I’ll help you find the best apartment for your portfolio. Tony Sargent, Tsargent@corenyc.com