What you should be buying....

The question comes up in almost every conversation. "What opportunities do you see in the market?" It used to be an easier question to answer, but nothing about NYC real estate is simple anymore. With that said, I DO have an opinion.

A good investment should do two things, limit risk and capitalize on future upside. It is because of this that I think the right play in 2021, is to buy newly developed multifamily buildings.

"DJ, I am a value-add investor, why would I buy something new that is perceivably maxed out already? You are ugly and a bad broker."

No, I am not a bad broker, and my mom thinks I am handsome.

Let's consider the risk in today's market. Tax increases and over regulation are killing NYC real estate. So how do you invest and still avoid bad policy decision? You take advantage of the policies that already exist, and you work them to your benefit. 

Newly developed properties being delivered now, likely benefit from the Affordable NY tax abatement. This program all but eliminates your tax exposure for the next 30+ years. You are essentially dodging the biggest exposure a landlord can face as it relates to operating expense. In return, you need to offer 30% of your units at 130% AMI, which is roughly $2600 for a 2BR, not bad. 

“Okay, so I control my expense liability, but where is the upside, every good investment has upside DJ. I am not excited about a 5% cap”

A 5% cap rate on last years rents may lack appeal to some, but what if those rents were 20% below the 5-year average. What if you believed NY would bounce back, and rents will increase to pre-pandemic levels, without you having to lift a finger? What if inflation naturally increased rent? What if you could get historically low debt, and lock in 10-year money at 3.5%. What if your equity could buy you 5 buildings, instead of the 1-2 rehab jobs you could afford pre-pandemic that ate up all your capital and always took twice as long? What if the abatement on new properties were expiring, and you could buy an asset now that will be truly unique a year from now?

I am all about creating value. I think it is one of the great appeals of investing in real estate. To build something and leave your mark. But in a political environment that discourages private investment, should you not consider alternative strategies?

We currently have 10 listings that benefit from long term tax abatements. If you are interested in learning about this asset type, or want to discuss other opportunities, please don’t hesitate to call us. 

Follow this link to setups:  https://www.dropbox.com/sh/u1glb6zeqtn7h1n/AAB8DcFZX7sFhAL0W-vKpsPma?dl=0

We look forward to hearing from you!

DJ Johnston | [email protected] | 914-584-7422