437: NYC Real Estate is Absurd

New York City real estate has distinctions and quirks that you’ll find almost nowhere else in the world.

Is it unreal estate?

This includes: super skyscrapers, air rights, apartments with doormen, co-ops, pencil buildings, and rent control.

Can you actually make money in NYC real estate?

Incredibly, the national or world capital of all these are in NYC: banking, finance, communication, advertising, law, accountancy, fashion, arts, architecture, media, and more.

1 in 18 Americans live in the NYC metro area. The population is growing. 

Guest Beth Clifford joins us. 

She has an impressive set of experiences, including on Wall Street, with startups, and as an international real estate developer. Beth is a former NYC resident.

Beth describes: how “air rights” are really development rights, pencil buildings, which apartments have doormen, and more.

There’s a short-term rental arbitrage strategy in NYC where you could make money. But is it legal? 

Join Thursday, Feb. 23rd’s GRE Live Event for Philadelphia, Pittsburgh and Baltimore properties. Ask me questions live. It’s free. Register now at: GREwebinars.com.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/437

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Economics in One Lesson

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StreetEasy.com

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Welcome to GRE! I’m your host, Keith Weinhold. New York City real estate is just absurd. It’s also really interesting and has distinctions and quirks that you’ll find almost nowhere else in the world. 

 

We’re talking about air rights, skyscrapers, apartments with doormen, co-ops, rent control, and how do you actually make money in NYC real estate? Today, on Get Rich Education.

 

Welcome to GRE! From Jamaica, Queens to Lower Manhattan. Across New York City and 188 world nations, this is Get Rich Education. I’m your host, Keith Weinhold.

 

As we’re talking about NYC real estate today, I think it can be regarded as exotic and Manhattan is the CENTER of American urban excitement from Times Square to the Statue of Liberty to the address “One World Trade Center” and more. 

 

It wasn’t always this way.

 

As the story goes, in 1626 - about 400 years ago - Indigenous inhabitants sold off the entire island of Manhattan to the Dutch for a tiny sum: just $24 worth of beads and "trinkets."

 

At that time, it wasn’t known as New York. It was called “New Amsterdam”. 

 

Today, NYC is the national or the WORLD capital of: banking, finance, communication, advertising, law, accountancy, fashion, arts, architecture, media, and more.

 

How could so much be in one place? Well, all this attracts a lot of people.

 

In fact, the NYC metro area population last year was almost 19 million, that’s up just about one-quarter of 1% from the previous year. So COVID hasn’t killed it.

 

This means that more than 1 in 18 Americans live in the NYC Metro.

 

Now, of the 5 boroughs, we’re really focusing on Manhattan today, since that’s where space is at a premium, hence that’s why the tall skyscrapers are there.

 

In fact, I have counted 17 skyscrapers that are all more than 1,000 feet tall - that’s almost one-fifth of a mile tall.

 

Now, Manhattan is crammed with such high density - and it isn’t just commercial space. Of course, residents live on Manhattan too.

 

But it is so crammed for space in Manhattan - and even in places of the four outlying boroughs, that it can kind of obscure your vision such that you don’t have the - I guess - wherewithal that you would elsewhere.

 

Here’s what I mean. Just last month I met a guy that has lived all of his life in NYC - part of his life in Brooklyn and part of his life in the Bronx.

 

He did not realize that when he lived in Brooklyn, he was living on an island. I don’t know how long he lived in Brooklyn, but I found a gentle way to tell him, without making him feel unintelligent - that yes, Brooklyn and Queens are both on LI.

 

That’s why you have all those bridges in NYC, like Brooklyn Bridge. They connect the islands.

 

Now, when it comes to rental property there, New York State has had the longest history of rent control in the United States, since 1943. The majority of those units are in NYC.

 

I have never seen one piece of evidence that rent control works long-term. If you have, please share that resource with us at GetRichEducation.com/Contact

 

When you put a ceiling on the amount of rent that can be charged like this, what tends to happen is that landlords have zero incentive to improve the property when they can’t charge more rent… or else soon, LLs would be losing money.

 

In many cases, soon properties and entire areas can become dilapidated because they haven’t been improved, and in bad cases, tenants don’t want to move out. They’d like to keep the cheap rent even if they need to tolerate increasingly squalid conditions in these neglected properties.

 

A classic economics book really outlines the rent control problem wonderfully. Though the author isn’t that well-known, Henry Hazlitt’s “Economics in One Lesson” really breaks down the problems with rent control terrifically.

 

That entire book basically outlines how programs like rent control only benefit a small group of people for a short period of time… like, oh, let’s give these people a break & be nice so that they can afford to pay the rent.

 

At the same time, you’re NOT playing nice to the property owner.

And how benefits to a small group of people in the short-term harms everybody long-term. Many will tell you that’s the case with… rent control.

 

Shortly, I’ll talk with an experienced developer, knowledgable about NYC development, she also used to live in NYC.

 

Wait until you discover some of the complexities of getting things build there. I expect her to share that.

 

She’ll tell us about things that you would never think of, like how… whether or not there are windows on the side of the a building indicates whether or not there’s a development opportunity there.

 

I’ll have her describe what “Air rights” are. Property “air rights” are not what you think they are. You’ll need to listen closely to that part as I expect explaining “air rights” involves somet math.

 

You’ll learn about what “skinny skyscrapers” are and why they don’t they build those wider.

 

NYC has coops - cooperatives. They’re different from a condo. In a co-op, you buy shares in a corporation that gives you certain occupancy rights. 

 

So rather than having fee simple title, you’re the shareholder of a corporation rather than having a title like you do with condos. 

 

And you’ve got to give the co-op board your income & taxes… because the corp wants to be sure you’ll be able to pay. And if the co-op board doesn’t like you dog or like you for whatever other reason, maybe they won’t let you join.

 

If you’re perusing apartments to rent in NYC - esp. Manhattan - some have a doorman and some don’t have a doorman. Why might it be desirable to have a doorman, when that’s not even offering in a place like, say Minneapolis or Houston?

 

I’ll ask our guest, “Is there any way you can make some real estate cash flow here.”

 

So, I’m often the one doing the teaching here on the show. But in just a few minutes, I expect to get some learning myself as we discuss the unique and unusual nuances of NYC real estate.

 

First, how long have you been listening to the GRE Podcast?

 

Well, that was a recent question in our Instagram Poll. 

 

Now, the sample size wasn’t that huge and the our average Instagram follower might be a more avid podcast fan that the average.

 

But with the question asked, “How long have you been listening to the GRE Podcast?” The results were:

 

      Under 1 Year = 11% of respondents have been listening for that length of time.

      1-3 Years = 32% of you

       3+ Years = 43% of you have been listening for that length of time.

       And EVERY SINGLE episode since 2014, yes, that is all 437 episodes. That comprises 14% of you.

 

So that’s about 1 in 7 listeners - at least in this poll - have listened to every single show. I’m really grateful for that. To shout out a sampling of those that have listened to every episode, that includes Kirby, Jacob, and Stacio.

 

I’m deeply grateful for that. I still of new people that find the show here today & then want to go back and listen to every single episode.

 

That is humbling indeed. 

 

NYC Real Estate is absurd. That’s next. I’m Keith Weinhold. This is Get Rich Education.

______________

 

Yeah, great stuff from Beth there… and hey, a good investment to the global elite might be different than what you perceive as a good investment.

 

If you’ve got $250M to place and you don’t need the cash flow, you just want RE for the proven inflation hedge that it is, then drop it all into a Manhattan skinny skyscraper and leave it vacant. Some people can afford to do that.

It was good to learn that the term “air rights” is misleading. It’s really about “development rights”. That’s probably a better way to remember it.

Now, when it comes to real estate in the northeast, Boston, NYC, and Washington DC real estate and their outlying areas really aren’t known as what we’d call “cash flow” markets.

But three other cities in the region are - Philadelphia, Pittsburgh, and Baltimore.

Our Mid-Atlantic provider even sees properties where the price is around 100 months' rent. Yes, the property price is just 100X the monthly rent amount. That is impressive.

That means that with just a 20% down payment, you can expect your monthly rent income to often exceed all the monthly expenses, even your mortgage payment.

Well, I’m going to discuss this at a live event on Thursday night, just 3 days from now. That is Thursday, February 23rd at 9 PM Eastern, 5 PM Pacific.

Yes, this live event is your opportunity to ask us questions live, and that it will be the first time ever that our in-house Investment Coach, Naresh, & I are both there, together, to help you, along with the provider in these mid-Atlantic markets.

Again, it will be in just three days, Thursday, February 23rd at 9:00 PM Eastern. It is completely free. Sign up now at GREwebinars.com

The nation's capitol, Washington DC, has a strong influence beyond the Mid-Atlantic region. The Baltimore metro area is slowly merging with the DC metro. Droves of Americans work in DC and live in Baltimore. It's a short commute and offers more space and affordability.

 

And then, with Pennsylvania being my home state, Philadelphia and Pittsburgh and have similar advantages. We’re talking about… Diverse economies Advantageous geographies Reasonable cost of living And substantially more landlord-friendly to you than NYC

 

Yes, GRE is hosting a live show on these markets. And typically on these action-oriented live events, we have a few real property addresses of freshly-rehabbed properties with tenants already placed, PM already in-place if you so choose and more. We’ll make it real with real, actual addresses. You could reserve a few if you so choose.

 

Tune and don't miss: The Professional Turnkey Provider Introduction We’ll have market talk on Philly, Baltimore, and Pittsburgh And look at that active inventory. Hey, special thanks to the extraordinary knowledgeable Beth Clifford today. Now, unless you have $250M to sink into skinny Manhattan skyscrapers, then… I hope & am looking forward to seeing you on Thursday night for some of the best ratios - rental properties with a high rent income in proportion to a low purchase price. Rather than $250M, it’ll take as little as $30K for a down payment and closing costs on some of these properties at Thursday’s live event. Amidst this continued scarce supply of inventory in America, we’ve pulled some strings and found a good selection for you in Baltimore, Philly, and Pittsburgh. This GRE live event takes place Thursday February 23rd at 9:00pm ET. I’ll see you there. It’s free. It’s interesting and it promises to be lucrative for you. Sign up now while it’s on your mind at GREwebinars.com Until then, I’m your host, Keith Weinhold. Don’t Quit Your Daydream.