Rising rents are fueling demand for previously overlooked Manhattan walk-up apartment buildings, according to the New York Times. Seventy-one such properties sold in the second quarter of this year, a 115 percent increase from the same period in 2009, Eastern Consolidated research shows. And as prices rise, sales volume has increased even more dramatically: $640 million worth of properties traded hands in the first half of this year, up 205 percent from the same period three years ago.
These properties are often occupied by at least some rent-regulated tenants, who have actually helped buoy investor interest in the sector. For landlords, they are an indicator of large profit potential, while for lenders who finance the acquisitions they are a sign of safety — building income literally can’t get any lower. As a result, buyers of these properties can often secure mortgage rates of less than 3 percent, compared to as much as 8 percent for new developments.
Ironically, while rent-regulated tenants may help seal the deal, the new landlord immediately begins trying to replace them with market-rate renters.
Simultaneously, landlords upgrade market-rate units in order to increase the rent roll. “We think that there are a lot of potential tenants who are coming out of high-end rental buildings with doormen and elevators that are looking for a similar feel but at a more affordable price,” Silverstone Property Group President Martin Nussbaum told the Times. [NYT] — Adam Fusfeld