The Real Deal New York

Condo buyers beware: Renting out swank units isn’t a major moneymaker

Yields on rented condos in Manhattan were only 2.5% in the 2nd quarter of 2017
October 02, 2017 03:45PM

Buying a condominium as an investment in Manhattan is looking less appealing these days as rents fail to keep pace with soaring sales prices.

The median return on newly purchased condos listed for rent was 2.5 percent in the second quarter of 2017, according to a recent analysis by StreetEasy. That means condo owners who rent out their homes yield only slightly more than they would on government debt, Bloomberg reported. The median yield on 10-year Treasury notes was 2.25 percent in the second quarter.

“This is the lowest point we’ve seen in history,” Grant Long, an economist at StreetEasy, told Bloomberg. “It’s a steady downward trend.”

A high supply of condos-turned rentals and climbing sales prices have made condos a less attractive investment. According to StreetEasy, more than 8,000 condo units were sold then listed for rent within 180 days of closing from January 2010 to June 2017. The median price of condos purchased to lease hit $1.7 million in the second quarter. In 2011, the median price was $899,000. [Bloomberg] — Kathryn Brenzel