What do New York’s biggest multifamily property deals teach real estate investors about the market?
A new report from Property Shark reveals the biggest multifamily property transactions in NYC over the last 12 months. The top ten were all in the $100 million plus range. What important takeaways can all real estate investors gain from this data?
1. Income Property is Hot: The big multifamily deals changing hands in 2015 dwarfed even the biggest single-family, condo, and co-op sales in terms of dollars. The demand for income property investments is massive. There is a huge appetite for income producing rentals. Low interest rates fears of other types of assets failing to perform this year are driving sellers to take advantage of the opportune time to sell. Now is the time for buyers to seize the moment and lock in great yields, with solid protection.
2. The Big, Smart Money is Bullish on Real Estate: NYC’s big buyers represent some of the wealthiest organizations and individuals on the planet. They are extremely bullish on real estate, now, and for the future. They aren’t just making big bets either; their stellar performance has been so great over the past few years that the S&P 500 is rumored to be adding real estate to the index as its own asset class later in 2016.
3. Serious Real Estate Investors Use LLCs: While brand new investors often try to bargain and justify reasons for not using LLCs or other forms of incorporation, all of New York’s biggest are virtually done in the name of LLCs. Serious investors do this for collaborating in partnerships, enjoying more privacy, legal protections, and likely to command better tax benefits.
4. Big Deals Offer Big Branding Benefits: For many, bold real estate deals are as much about branding as anything else. What may seem like paying crazy sums for properties to others, consistently elevates the visibility and brand of both financial firms and real estate deal makers. Those involved in making these deals happen are today’s new celebrities. Their plays help draw more business, and boost their personal value. Having purchased, or brokered the most expensive or desirable property in the city is certainly a highlight on a resume that won’t soon be forgotten.
5. You Aren’t Thinking Big Enough: The biggest multifamily property deal in New York last year was a combination of two communities, totaling 56 apartment buildings. The purchase by Blackstone topped $5 billion. The top ten were all $100 million plus. The cheapest in the top 20 still topped $60 million. Even more impressive were the spreads made on some of the big ‘flips,’ some which had been purchased in the low tens of millions just a few years ago.
6. $200 Million is the New Trendy Price Tag: After Blackstone’s massive multi-billion dollar purchase, the next largest was just shy of $200 million. Another, which had been expected to go for $200 million, sold for a little over $160 million. In other news, Hugh Heffner recently put the Playboy mansion up for sale for $200 million. While few properties of any type will sell for more than this in the near future, it certainly raises the bar.
7. Online Reviews Matter: Try looking up the addresses of last year’s big multifamily deals and you’ll often find reviews of buildings and property management companies. Not only will future buyers, lenders, regulators, and potential partners see these reviews, but so will potential tenants. Curate and handle online reviews well, or they could significantly impact your real estate investment performance and potential. In fact, more may need to step back and create systems and standards which deliver superior service, which breeds great reviews from the start.
Summary
The big deals of the last 12 months provide some great learning points for all investors. It’s time to think bigger, think ahead, use entities for protection, deliver better service, and beef up your brand. Master these items and you could find profits well beyond you goals.
