Why the Best Time to Invest in Manhattan's Real Estate Market Is Now

Industry Observer with ValuePenguin


“Buy low, sell high” is the name of the game when it comes to investing—the same way “location, location, location” is central to real estate investing. But what happens when both opportunities present themselves in a rare opportunity to make a profit?


Some signs point to such an opportunity existing in the Manhattan real estate market. Last year, CNBC noted that Manhattan real estate was in a year-long correction, with total real estate sales falling 11 percent in the third quarter from a year previous and the average price of a Manhattan residence falling 4 percent during the same quarter.


On the surface, seeing prices fall that hard might make it seem like now is a poor time to buy: Declining prices mean less rent, for example. But if the best time to invest is when the price is low, might now be the best time to invest in Manhattan real estate?


“You Can’t Add More Land in Manhattan”


Manhattan is one of the densest and most exclusive places to hold real estate in the world. As the old saying goes, notes Forbes, "You can't add more land to Manhattan." That means a limited amount of opportunities to change supply when demand swerves up or down. But with luxury apartment sale prices plunging as well and a relatively stable supply, some investors note the obvious: that demand is bound for an uptick eventually.


The problem is a matter of timing. It's difficult to forecast exactly when the demand for real estate in Manhattan will restore to previous levels.


One point investors often turn to: previous performance. A report of Manhattan real estate saw big fluctuations in the 2000s with the housing bubble bursting; the 2010s saw more opportunity in sales activity with low mortgage rates. As Forbes notes, the laws of supply and demand still apply in a place like Manhattan, and when demand for real estate goes up, a place with limited supply like Manhattan will necessarily see its prices go up as well.


Making the Most of an Opportunity


How can investors make the most of an opportunity when they see it? Unless you've been saving money after 2008 with an eye on buying real estate when it's low again, there's a good chance that it's difficult to swing. Here are some ideas for seizing opportunities in real estate:




  • Using a Self-Directed IRA. In some cases, it may be possible to use leverage with a non-recourse loan in a Self-Directed IRA to purchase real estate; this has the caveat that you have to treat the real estate as an investment and not keep it for personal use.
  • Maintaining good credit. If you need to secure a mortgage loan to secure real estate for yourself, maintaining good credit as well as a substantial amount of cash for a down payment will the process much easier.
  • Watching the individual neighborhoods. The phrase "Manhattan real estate" is a bit of a misnomer; the truth is that Manhattan is a city unto itself, with its own district and neighborhoods. Just as is the case in any city, these individual places will tend to have their own fluctuations as real estate conditions change.



Building a Strong Foundation for Real Estate Investing


How can an investor utilize an opportunity like low demand in Manhattan real estate? It begins by creating a strong foundation. Investors can accomplish this by building up good credit as already mentioned. But how else should personal investors prepare for a real estate investment when the opportunity strikes?


Paying off debt is an important first step. Taking on additional mortgage debt to make a real estate purchase means having less net income to play around with; paying off existing debt helps create a strong foundation for making wise investments.


Avoiding house fever—or a Manhattan real estate equivalent—is also important. Even buying something as valuable as Manhattan real estate requires a patient eye for the future and a long-term approach. Avoiding “house fever,” or the mindset that can lead to rash decisions, is essential for maintaining a clear head.


Active research such as using credit card points to visit Manhattan to get a sense of the situation can also help you decide whether investing now is a good idea.


It’s also important to maintain a strong credit history through the use of credit accounts and on-time payments of existing debts. If the time to invest in Manhattan real estate is now, it’s an opportunity some investors can’t afford to pass up.





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Joe Resendiz

Jr. Research Analyst
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