Why is New York City so expensive for real estate (and why is that an opportunity)?
It should come as no surprise that real estate in New York City is extremely expensive. Local nicknames like Billionaires’ Row have long indicated that New York City real estate has been historically inaccessible to the average investor.
But why is New York City real estate so expensive?
There’s only so much space to go around
Sky-high property prices come in part from the scarcity effect in action.
The limited land of this cultural epicenter has driven the demand for property for over a century, and in return the consistent demand for property has driven the land value of New York City to record-breaking price tags.
But what many investors don’t know is that New York City real estate is not just expensive because of the high value of real estate — desirable investment property in New York City comes with a whole host of other fees and costs attached.
You may think that your opportunistic property purchase is a steal or that your money is in good hands with your REIT, but there are things a real estate agent or your REIT manager may not be telling you.
The true cost of New York City real estate
The process of buying a building in New York City involves a lot of middlemen, and where there are middlemen, you can bet there will be fees.
Here’s a breakdown of the costs other than the purchase price you may face when acquiring investment property in New York City:
Real Estate Agent Buyer Fees
You may have heard that buyers don’t pay their real estate agent’s commission, but this is a common misconception.
While it’s true that sellers are the ones on the hook for real estate agent commissions, this means that the cost of the commission is baked into the purchase price without you even knowing it.
As a buyer, you indirectly pay this commission through a higher sale price. With agent fees representing 6% of the sale price and property in New York City averaging 2.2 million, this puts the hidden cost of commissions into the hundreds of thousands.
Inspector fees
Any property you purchase will have to be inspected by a professional who will examine the building for fire or flood damage, have a look at the neighborhood, and advise you about renting law and property lines in the area. In New York City, this necessary service can cost you upwards of $500.
Title insurance
In the case of buying a condo, buyers are required to cover the title insurance of the property. Title insurance rates vary widely, but you should expect to spend between $3,000 and $4,000 on a single New York City condo alone.
Attorney fees
A thorough and expedient closing requires a good real estate attorney, and good real estate attorneys don’t come cheap. Most law firms charge between $2,000 and $5,000 for their crucial negotiation and closing services, and of course any situation more complicated than average will drive up the fee.
Administrative and processing fees
Administrative and processing fees may seem like small potatoes next to major professional fees. What’s a $100 filing fee or $250 lien search charge when you’re paying your attorney $5,000? But with so much paperwork required to purchase property, these smaller fees can start to add up.
Bank fees
If you plan on taking out a mortgage to purchase your investment property, you should also plan on paying $2,000 to $3,000 in bank fees. And don’t forget the mortgage tax — up to 1.925 percent on loans over $500,000.
Other hidden fees
A surprise birthday party might be fun, but surprise fees in your real estate investment purchase are never good. Here’s a list of hidden fees that may be lurking in your closing costs:
Sponsor closing costs
Is the brand new building you want to purchase on the hook for developer closing costs? Chances are you will be too, including transfer taxes and attorneys’ fees. Depending on the sale price of the building, this can add up to hundreds of thousands of dollars.
Mansion tax
It’s exactly what it sounds like — an extra 1 percent tax tacked on to any New York City sale price over $1 million, whether the property is an actual mansion or a tiny Manhattan apartment.
Move in or out fees
All right, you’ve nearly closed on your building — think there couldn’t possibly be any more surprise fees? Think again. Many condos and co-ops charge move in and move out fees, so before you can get rent-paying tenants into your investment property, you’ll have to pony up a couple hundred to a couple thousand in moving fees.
Altogether, you should expect to pay between 2–4 percent of the purchase price of the property in closing costs. And with property prices in New York City regularly topping $2 million, this becomes a significant number.
No more business as usual
Investors fed up with hidden fees and tacked on taxes should take note — New York City Real Estate Coin (NYCREC) is here to shake up the system and doesn’t consider exorbitant fees to be “business as usual.”
Operating with total transparency (unlike your average REIT), NYCREC intends to expose inefficiencies of the real estate process and reduce the expense burden on investors.
With cumulative decades of experience in the New York City real estate market, our team of seasoned professionals knows which middlemen are necessary and which aren’t, as well as how to get the best rates in any situation.
Utilizing this expertise, NYCREC will dramatically reduce fees and capitalize on the inherent inefficiencies of real estate that other investors fall prey to.
What does that mean for you? Lower fees mean higher profits for our token holders during our Ethereum airdrops.
Where others see an inaccessible market, NYCREC sees an opportunity — the consistent demand and rising prices of real estate in New York City have created a market environment with sky-high yields, and with fewer middlemen and reduced fees through NYCREC, investors have the opportunity to see bigger returns than previously thought possible.
Want to find out more about NYCREC? Read our whitepaper and join our Telegram group to be a part of our active and helpful 24/7 community.
