How the Average Investor Takes a Bite out of the Big Apple's Real Estate Market

Posted by Terrance Wyatt on

It's quite easy to justify the statement by just talking to the average person on the street that New York is known world over for its real estate market. The prices have a lot to do with this. At the end of 2016 the average apartment price in Manhattan (New York) exceeded $2 million dollars. The average price to purchase a condominium astoundingly exceeded $3 million. Both of these seemingly inconceivable figures are record highs for the famous borough in the "city that never sleeps". 

Source: Elliman Report - Q4 2016

A large part of Manhattan's mystique and correspondingly expensive real estate prices have much to do with the fact that the area has historically offered for the wealthy and the highly educated: career opportunities, entertainment options, and mingling with people who are at the top of the socioeconomic hierarchy. This close proximity of educated career-driven individuals has increased the prospects for continuing economic growth and the attractiveness of Manhattan as a place to be in the United States. 

This along with Manhattan being the most densely populated section of New York City has driven apartment prices up by 91% since 2006 according to a report by the real estate tracking website CityRealty. This sharp appreciation over the last decade has made it difficult, if not impossible, for most average investors to be able participate in the NY real estate boom. 

The most obvious way investors with enough free capital think to invest in this market  is through direct purchase of property although stringent rules regarding the type of property being purchased in conjunction with the numerous external considerations one must make before investing often deter individual investors residing outside of New York City.

On the other hand, there are also a number of publicly traded REITs (Real Estate Investment Trusts) available that are often utilized by investors as  a more diversified and cost conscious alternative to invest  in "The Empire City". These include the following names.

 Company Name Stock Symbol Market Cap (May 2017) Year Established
Clipper Realty Inc. CLPR 196.8 (millions) 2015
Empire State Realty Trust, Inc. ESRT 6.1 (billions) 2011
SL Green Realty Corp. SLG 10.6 (billions) 1970
Vornado Realty Trust VNO 18.6 (billions) 1982

 

These trusts (among others) today own a big chunk of Manhattan in both the residential and commercial spaces. Except they ultimately don’t really own them — their shareholders do (which could be you). Who they actually are, few seem to know or care. But it matters. Anyone who has ever listened to a REIT’s earnings call will know that executives obsess over shareholders. Their approval determines a REIT’s market value and ultimately its ability to raise money and buy more properties - which more importantly will hopefully lead to greater distributions for investors in the REITs in the future. 

Also, as of May 2017 the first private (or non-publicly traded) Manhattan residential focused REIT  fittingly named "NY Residential REIT" was made available to both non-accredited and accredited investors simultaneously by an ambitious management team at Commencement Capital LLC headquartered in New York. NY Residential REIT joins a growing list of companies, including Fundrise LLC and Realty Mogul Co., that have used the relatively new rules outlined in the 2012 Jumpstart Our Business Startups Act, or JOBS Act to target individual real estate investors.

So if you've ever fancied being able to say at your next get together with friends that "I own a piece of real estate in Manhattan".....You won't be telling an entire lie if you own any of the REITs named above.

To learn more about various evolving methods & strategies around real estate investing online in the 21st century please feel free to access my lecture on the subject in my full investment course


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