The Real Deal New York

Investors bail on Bed-Stuy

Soaring prices and stabilizing rents are making it harder for investors to make quick profits

March 06, 2015 09:10AM

Brownstones in Bedford Stuyvesant

Brownstones in Bedford Stuyvesant

Due to soaring prices but stabilizing rents in Bedford-Stuyvesant, investors are increasingly leaving the neighborhood.

Investors are no longer able to make a quick profit by selling and re-selling properties in what was heralded as Brooklyn’s newest destination, according to the New York Daily News. The change could slow down the neighborhood’s high rate of gentrification, according to the newspaper.

The median price for a vacant parcel of land has soared to $808,000 from $235,800 in 2013, according to the Daily News. The median price for a multifamily building is up to $975,000 from $652,500 since two years ago. Meanwhile, rents in the area are stabilizing. Monthly rent in the area fell by 1.8 percent in January, according to the newspaper.

A few years ago, investors were quick to pick up Victorian-era townhouses that line the streets of Bed-Stuy, renovate them and sell them for hefty profits. In Bed-Stuy, however, this seemed to have lead to a bubble.

“It seems like the Bed-Stuy market has topped out,” GFI Realty Services president Michael Weiser told the newspaper. “Returns have come down tremendously. That ocean has been fished out.” [NYDN] — Claire Moses

 

 

  • bubbletime

    Insert just about any neighborhood name in this article and it is true. What is happening in Bed Stuy is happening throughout Brooklyn and Manhattan. Real estate is cyclical and the improving economy is not going to help the investment market. Values are up primarily because of cap rate compression and when long term interest rates start to go up… cap rates will follow. Rents have peaked. It started 8 months ago. It’s not always obvious because so many units are being repositioned out of the stabilized market but rents have been flat for a while.

  • Bed Stuy Broker

    I disagree with this article. My biggest problem in Bed Stuy is that there is not enough supply. I have a waiting list of end buyers. I think the % return is still the same as it was 2 years ago on a 1 year buy, renovate, and sell.

    • comment flagged

      Everyone who does business in Bed Stuy have a drawer full of names of people who would buy at some price. The numbers aren’t penciling out for rehabs that would keep 2-4 units as rentals and end-users are outbidding operators for townhouses. Rental growth has hit a ceiling since the students and working people who were priced out of Williamsburg and Park Slope that moved to Bed-Stuy still have a price ceiling of what they can afford for rent. Rents can’t push much higher unless there’s wage growth for new-comers and/or old-timers.

      Would you disagree?

  • NYCFLIPPER

    The problem with Bed Stuy is that there are many properties listed for the high price and the current rent price doesn’t keep up with the new price with renovation. It doesn’t make sense to buy a 2 or 3 family houses for $1.5 mil then put down another 500K to gut renovate unless there is an empty lot can investors can build a multi family buildings. Bed Stuy G train sucks. They don’t come often and not reliable. Its hard to find parking.

  • NYCFLIPPER

    Its time to move to Ridgewood where you can demo those wooden frame houses and build another on top of it.

  • Sinai Sassouni

    The problem is that I already bought and flipped 30 properties and there aren’t any left…

  • One

    If investors were fleeing there would be a glut of inventory and prices would come down. At this point, it does not look like it is in the cards. I think GFI needs to relook at their numbers.

  • dave

    Bedstuy wasn’t a good idea already for more the a year and half or two. To begin with buying in order to rent is not such a good idea in NYC. NYC is a pro tenant and it’s very tough evicting none paying tenants. Average court proceedings are 6 month at minimum and can be over a year easily. Best market is Hudson County NJ as properties are lower (taxes are high) rent income is great. Hudson County is a pro Landlord so in case of none payment at themes it takes 60 days to complete eviction. the distance to the city is as close as any borough in NYC to Manhattan. NYC is a good place to flip if you buy right.

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