Market Trends: Flippers becoming Landlords
BACK IN TIME: It's springtime 2004, the anxious buyer is gleaming across the closing table at the seller with the cheekiest of grins. The seller is staring at their watch with only one concern...how fast can I get out of here and away from this self rightous a**hole. The buyer's broker is seated in the corner, anxiously awaiting the closing to end not only because he is getting paid or has somewhere else to be, but because he will leave the closing with a check in hand and a brand new exclusive listing to put back on the market. Long story short: In the 3 months between the accepted offer and the closing, this property has increased in value by nearly 40%!!
Don't hate the buyer for having foresight and certainly don't hate the broker for finding and negotiating a great deal. All is fair in love and NYC real estate!!
PRESENT DAY: It's Springtime 2006, both the buyer and seller at the closing are taking advantage of the 1031 property tax exchange. The vibe is cordial. The seller who held on to the property less than a year did not receive a great return but is very happy to have recieved a return at all. The purchaser is aware that this is a much longer term investment strategy and it could take a few years to build up enough equity to make a nice profit. Because of this he must make a downpayment of at least 50% of the purchase price (50% financing) in order to break even every month on his rental investment. The brokers in the room are quiet, perhaps a bit humbled and tired to say the least. The listing broker has spent considerable time and money marketing the property and the selling broker has spent much time and energy showing apartments and educating his buyer. The property has already been rented for a record setting rent. The new tenant will move in after the closing.
This is a glance at what is happening today in the Condo market. There is still not an abundance of resale inventory on the market but properties are sitting on the market for much longer. The savvy seller now has 2 options:
1. Keep the property on the market for sale but pay close attention to the amount of showings and buyer reaction. Demand maximum exposure and advertising from your broker and most importantly, remain patient, realistic and negotiable.
2. Rent the property. The rental market is facing a massive shortage of inventory (.067% in April) and now with the prime rental season ahead this is a landlords dream.
Refer to the May 15th article in the Daily News titled Rental Crush for a more detailed analysis of the current rental market in NYC.
At the end of the day sellers should not be discouraged. There is still not alot of good inventory available and interest rates are still historically low (if you don't believe me ask anyone the purchased a home in the 80's). For aggressively priced properties, the open houses are very busy and brokers will agree that there are still plenty of people buying NYC real estate.
