Archive for Investors

Today, Elliman released the October 2012 Elliman Report for Manhattan & Brooklyn Rental Markets.   The Rental Market Report sumarized below and reported here was prepared by Miller Samuel for Prudential Douglas Elliman

Falling vaccancy rates continued to drive rental price indicators higher, despite the rising number of consumers moving to the purchase market.”

 

  • The Manhattan vacancy rate fell to 2% from 2.32% in the same period last year, while rentals with landlord concessions had a nominal 4% market share
  • The overall median rental price edged 1.6% higher from $3,150 in the same period last year to $3,200, its highest october level since the credit crunch begain in 2008.
  • New rental activity for smaller units slipped as low mortgage rates compelled consumers to purchase.

This week, we released our Fourth Quarter report for the Manhattan Residenital Rental Market.  Manhattan Residential Rentals Market Overview Q4 2011 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“Tight mortgage credit conditions continued to drive rental prices and activity higher.”

  • The median net effective rent (face rent less landlord concessions) jumped 9.5% from $2,950 to $3,121 in the same period last year. The year-over-year-gains were consistent across all rental price indicators.
  • The 2-bedroom and 3-bedroom markets outpaced their smaller counterparts,increasing 14% and 18.1% respectively over the same period.
  • New rental activity (excluding lease renewals) was up 10% from 7,217 to 7,942 in the same quarter last year.
  • About 7.4% of new leases had some form of landlord concession compared to the 40.5% in the prior year quarter. For those leases with concessions, the average amount was the equivalent of 1.2 months of free rent.
  • Days on market—the number of days from original list date to lease signing—was at its second fastest pace of 37 days in 15 years, which is when we began tracking this metric.

Today we released Third Quarter report for the Manhattan residential rental market.  Manhattan Residential Rentals Market Overview Q3 2011 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

  • Median rent with concessions (net effective monthly median rent), increased 4.9% to $2,970 from $2,831 in the prior year quarter.
  • The number of listings on the market slipped 1.9% to 4,605 in the third quarter from 4,693 in the prior year quarter. Number of new rentals declined 6.9% to 7.998 from 8,593 over the same period last year, as more tenants likely opted for renewals.
  • Approximately 8.6% of new leases had some form of landlord concession, compared to 45% in the prior year quarter.
  • Of the leases with concessions, the average amount was the equivalent of 1.2 months.
  • Days on market—the number of days from original list date to lease signing—was 58 days, nearly 3 weeks slower than the 38 day average of the prior year quarter.
  • The absorption rate for new rentals was 1.7 months, essentially unchanged from 1.6 month in the prior year quarter but down sharply from 7.7 months in the same period two years ago.

 

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Aug
18

The New 3.8% Real Estate Tax Is Coming

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Beginning January 1, 2013, a new 3.8% tax on some investment income will take effect.

It was passed by Congress in 2010 with the intent of generating an estimated $210 billion to help fund President Barack Obama’s health care and Medicare overhaul plans.

It’s complicated and difficult to predict how it will affect every buyer or seller.  The National Association of Realtors ® developed a brochure with examples and different scenarios

  • ·         Effective January 1, 2013, the 3.8% tax will affect some but not all income from interest, dividends, rents and capital gains.
  • ·         Only on individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI
  • ·         Applies to the Lesser of Investment income amount in excess of the AGI amount over $200,000 or 250,000

 Read more about it here.

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Today we released Second Quarter sales  report for the Manhattan residential rental market.  Manhattan Residential Rentals Market Overview Q2 2011 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

Q2 2011 Rental Highlights

  • There was an 11% decline in the number of rental listings available, as new rental activity expanded 51.5% from the second quarter last year to the same period this year.
  • A nominal 3.4% of new rental transactions received landlord concessions, averaging an equivalent of 1.2 months of free rent, compared to 60% of new rentals receiving an equivalent of 2 months free in the same period last year.
  • Tenants paid a median net rental price of $2,888 per month this quarter, as compared to $2,700 in the same quarter last year, also marking a 2.8% increase from $2,808 last quarter.
  • The average number of days from original list date to lease signing, or days on market,was 33 days, nearly 3 weeks faster than the 53 day average in this quarter last year.

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Our Q4 Survey of Manhattan co-op and condo sales which was released today and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman

 

 

 

  

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Recently with the devaluation of the dollar and the uncertainty of investments elsewhere around the world, many more foreign nationals have been interested in purchasing Manhattan residential real estate as an investment.

It is no more difficult for a foreign national to obtain a mortgage than for an American citizens buying in New York City if the residence is to be a primary residence (or at least a pied-à-terre). However,  an investor who is not prepared to pay in cash and wants to obtain a mortgage for a property that will be used as an investment (i.e. with rental income), will find it difficult or impossible to find a mortgage with low rates.

The foreign national buyer, in addition to putting together a search team including a real estate broker and a mortgage lender (if necessary), should search out a New York City attorney who may be able to help save thousands of dollars in taxes or at least alert you to the tax consequences of the purchase.

For just such an investor, I recently had the pleasure of working with Michael C. Xylas of Abrams Garfinkel Margolis Bergson, LLP. One of the partners, Neil Garfinkel, recently published an extremely informative discussion, very helpful to foreign buyers, summarized below and found in its entirety here.

Foreign investors are lured to US real estate by the stability and security of the US Real Estate market.  Generally they can enjoy a steady appreciation of US real property and without the volatility of financial markets, making the prospect of economic gain through rental income and capital growth the strongest attraction.  With relative political and economic stability in the US, there are fewer barriers to foreign purchase of US real property.  The weaker dollar and lower property prices make these investments even more attractive for foreign investors.

While easy to purchase as a foreigner, real property comes with reporting and tax consequences that must be considered.

“For the purpose of US Income Tax, a Foreigner or non resident alien (NRA) is an individual who is neither a US Citizen, a green card holder nor US Tax resident.  The test to determine if an NRA qualifies for the same status as a US citizen or resident individual is based on ‘substantial presence’.  This is defined by the number of days that one must reside in the US to achieve such status.   For the purpose of US Estate and Gift Tax, the test is more subjective, based on one’s intent of permanency in a particular country.  Importantly NRA’s are nevertheless subject to estate and gift taxes on any asset that are actually situated in the US.”

It is extremely important for foreign investors to work with a qualified team of legal, accounting and brokerage/valuation advisors who understand the rules in the foreigner’s home country as they correlate with the laws of the United States; if handled correctly, the transaction will be most suitably structured with consideration for investment, accounting and tax purposes.

Consider the Structure used to purchase the asset while planning your purchase:

  • Individual owner (Direct Ownership) and Single Member LLC
    • Real property used as a residence for personal use
    • Least complex
    • Required to file US Income Tax return
    • Estate Tax issues, Federal and possibly State
  • Shareholder in a domestic or foreign corporation
    • Domestic Corporation
      • Provides a liability shield
      • The Corporation is the taxpayer, eliminating the need for individual annual tax returns
      • Does not avoid US Federal estate tax liability
      • Two levels of tax imposed on corporation income:
        • Corporate level tax imposed
        • 30% withholding tax on dividends paid to individual owner/imposed (this could be lower based on a favorable tax treaty between the foreign investor’s country of residence and the US)
    • Foreign Corporation
      • Limits tax liability, mostly used to avoid US income tax as well as US estate tax.
      • Pass on US real property to estate beneficiaries without paying US  taxes
      • No individual US Tax return, however
        • 30% branch profits tax against the foreign corporation ‘dividend equivalent amount’ (regardless of any current distributions to the shareholders, the tax is imposed on corporation’s taxable income that is effectively connected to a US trade or business.
    • Foreign corporation which owns a US corporation
      • More complex structure, both foreign corporation and domestic US corporation are formed
      • Foreign Corporation owns the Domestic US corporation which owns the real estate asset.
      • more costly and complicated
        • Investor is provided a limited liability shield and does not file any US tax return
        • Federal estate and gift tax are not applicable
        • Branch Profits tax not applicable
        • Ultimate investor would be transparent
        • Income tax would be taxed at a less favorable rate compared to individual ownership

Oct
23

Tudor City: A Serene Wooded Escape From The City.

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Manhattan is dotted by many neighborhood or “pocket parks”, “all with a bit of peace in every nook“. If you make a left on 41st Street you’ll find, Tudor City, a serene wooded escape from the city.

“One of the most beautiful small parks is truly hidden in plain sight. The privately maintained Tudor City Greens, with charming pebbled paths, dazzlingly maintained vegetation and even one original 1927 lamppost.

The south side especially has the look of a botanical garden, with varied shades of green (and yellow and purple and red) leaves placed in strategic contrast. The view is dominated by Tudor-style apartment buildings of the enclave, named a city historic district in 1988”.

The residents of the Tudor City neighborhood have free access to these public, “secret” parks and enjoy such events as an Easter Egg Hunt, Spring Concert Series (May through September 7th), Halloween Party (October 31st–6pm), Fall Planting Day November 6th—10am to 2pm), Menorah Lighting (December 1st–6pm), Decorating for the Holidays (December 4th — 11am) and the Christmas Tree Lighting (December 9th —6pm ).

The neighborhood has a grocery/deli, a café, cleaner and even its own highly rated southern Italian restaurant, Convivio.

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Our Q3 Manhattan Rental Market Overview which was released today and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman

  • Median rental price was $3,000 in the third quarter, 1.7% higher than $2,950 in the prior year quarter and unchanged from the prior quarter.
  • Median rental price growth over the prior year quarter occurred in the studio and 1-bedroom markets with a 9.8% increase and 1.9% respectively.
  • The number of new rentals surged as landlords offered limited concessions for lease renewals. Rental listing inventory fell 28.1% to 4,693 apartments from 6,527 listings in the same period last year.
  • The listing discount—the percentage difference between original rental listing price to contract rental price—fell to 1.7%, its lowest level since the third quarter of 2006.
  • Days on market fell to 38 days in the third quarter, less than half the 77 days of the prior year quarter.

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Jan
16

Q4 Manhattan Residential Rental Report

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Recently the industry has reported data on  fourth quarter  rentals for the Manhattan residential market. The Q4 Manhattan Rental Market Overview reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

  • Average rental price declined 4.3% to $3,789 from $3,958 the same period last year but up 0.8% from $3,759 the prior quarter.
  • Rental price per square foot declined 4.6% to $47.02 per square foot from $49.30 per square foot during the same period last year, and down 1.7% from $47.84 per square foot in the prior quarter.
  • Median rental price declined 9.4% to $2,900 from $3,200 in the same period last year and down 1.7% from $2,950 in the prior quarter.
  • Number of rentals surged 47.5% to 2,456 units from 1,665 units in the prior year quarter.
  • Listing inventory fell 21.3% to 5,225 units from 6,640 units in the prior year quarter.
  • Days on market were 76 days, down from 97 days this time last year.
  • Listing discount was 6.5%, down from 6.9% in the same period last year.

The reports do not account for the incentives (concessions) that tenants are frequently offered in the current market, like months of free rent or waived brokers’ fees. It is worth noting that that if those factors had been taken into consideration, rents could appear considerably lower. Perhaps as high as 10% lower.

Experts remain cautiously optimistic about this year as the unemployment rate, which has a huge impact on the rental market, remains high. ”We are looking for more of the same in the first half of 2010–stable activity and pricing,” Mr. Miller said.

Jonathan Miller’s pod cast discussing the Q4 Manhattan Market Overview can be heard here.

In addition, reporting and analysis of  the Q4 Rental Market Survey were consolidated on the Miller Samuel website and shown below.

01/14/2010 PR Newswire Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 Earth Times Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 Business Week Manhattan Apartment Rents Drop 9.4% as City Job Losses Mount

01/14/2010 Bloomberg.com Manhattan Apartment Rents Drop 9.4% as City Job Losses Mount

01/14/2010 TheStreet.com Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 The Real Deal Manhattan rental deals up in 4Q: reports

01/14/2010 Yahoo Finance Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 Fox Business Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

In addition to the Prudential Douglas Elliman report, some of the above articles refer to the Citi Habitats Q4 Market report.

1 -The Numbers

  • Manhattan residential real estate has performed better than the broader U.S. real estate market.
  • Compared with losses of more than 40% for Los Angeles and San Francisco over the past few years, Miller Samuel reports in the third quarter 2009 Manhattan Residential Market Overview that the average price per square foot in Manhattan was $996 vs. $1289 as reported in the first quarter of 2008 , a price reduction of 23% from the peak.
  • Third-quarter 2009 data show prices declined at a lower rate while transaction volume surged 46%, a sign that the Manhattan market is starting to find its bottom.
  • As Donald Trump once said “It’s a water thing”. Manhattan is a landlocked island. While developers in most cities keep expanding outward, developers in Manhattan do not have this alternative.
  • Wall Street firms are expected to pay a record $140 billion in bonuses this year according to The Wall Street Journal. Regardless of whether these bankers deserve their lavish bonuses, their payday will boost Manhattan real estate prices.

2 -Capital of the World

  • Manhattan is a global must-see destination. Emerging markets like Brazil and China are creating wealth at a very high rate and churning out millionaires.
  • New York is often the first international destination new millionaires from emerging countries want to visit. It’s also one of the first places where they want to buy investment property or a pied-a-terre.

3- Diversity of Industry

  • Besides finance, New York has media, hospitality, advertising and professional services like law and accounting firms. These industries will be serving emerging-market economies and will benefit the local New York economy in terms of job creation and housing demand.
  • If not for the diversity of the current New York City economy, the unemployment rate would be even higher than 10.3% that was reported in August.
  • Sectors like education, health, leisure and hospitality have gained jobs, which partly offset the negative impact of the financial job losses.

4 -Quality of Life

  • New York City is one of the safest cities in the US.
  • The legal system is established and there is a better work-life balance compared with countries like China.
  • Transportation in Manhattan via the Subway system is efficient and reduces commuting time for those living in Manhattan.
  • The air in Manhattan is pristine compared to air in other global metropolises like Hong Kong.

Portions excerpted from NuWireInvestor reporting on a story written by Wei Min Tan of TheStreet.com