Why Bronx Real Estate Offers Great Return Potential

Why Bronx Real Estate Offers Great Return Potential

Real estate investment experts believe that sustained political uncertainty — especially 2020 being an election year with heightened political and social tensions — could mean property buyers proceed cautiously. In New York, the new rent laws are undoubtedly shaping the landscape as both the condo and rental markets tighten. For New Yorkers, deciding whether to buy is now being driven by what’s important and valuable rather than impulse. One driver is the desire to minimize daily commute to gain more time for family or take kids’ children to school, and to steer clear of potential Covid-19 infection in crowded spaces.

In the Bronx, the cap rates have hovered around the mid 5% range in contrast to the figures of about 3.5% seen in Manhattan. This phenomenon can be seen in two different ways: Rents in the Bronx have neared a top or home prices in Manhattan are rising so fast that monthly cash flows are unable to keep up. No matter the eye used, any investment to the north of Harlem should be viewed as a good bet. Investors stand to potentially get more for their investment by buying properties in the Bronx. Besides, the historically high crime rate in the Bronx has witnessed a marked decline in the past three decades.

The Bronx has numerous residential neighborhoods, including single-family homes and multifamily developments. It also has retail, with some big-box stores, several shopping areas, and warehouse space. It’s in the Bronx where you find the Yankee Stadium. Some of the best neighborhoods are Throgs Neck, Riverdale, and Wakefield. If you are looking for a home to buy or rent, you may want to consider one of these neighborhoods.

It’s worth noting that although in the first half of 2020, the Bronx closed at the lowest median sale price among the four NYC boroughs, it recorded the 2nd-highest price increase. The borough’s 8% year-over-year gain brings the H1’sH1’s median sale price in 2019 H1 from $420,000 to $455,000 in H1 2020.

The NYC Tax Laws Impact on Property Market

The federal tax law change eliminates the local and state tax deduction, meaning that many real estate/property owners can’t write off their huge NYC property federal tax bills in their entirety. That move is likely to push many to sell homes since they will no longer afford the associated carrying costs. For those owners with multi-million dollar properties, the newly approved mansion tax gives them a reason to dispose of as soon as possible.

As listings continue pilling up and the carrying costs rack up, you can expect to see a surge of sellers willing to mark down their NYC properties and sell. In a stronger indication that realtors and homeowners are gaining more confidence in the Bronx’s housing market, Point2 Homes indicates that property asking prices in the Bronx have increased by a massive 54% over the past five years.

For the past couple of years, analysts and real estate experts have billed the Bronx as “the last frontier” in real estate investment. This is true for developers looking to get a great return for their Dollar. Prices in this borough are hovering much lower than the NYC average, particularly the highs in Manhattan and Brooklyn.

The Impact of the Covid-19 Pandemic

From a purely numbers perspective, even before the onset of Covid-19, the multifamily market in New York State was already experiencing a slowdown, largely due to the Housing Act of 2019. Still, the relative market stability in Q1 may not maintain into the Q2, despite the drastic measures taken, such as lowering the Federal Reserve’s interest rates to near zero because of the Covid-19 effect.

When the first Covid-19 cases were confirmed in early March, NY’s real estate industry took note but largely continued to operate as normal. However, now the outlook has changed significantly. New homes for sale decreased 9%, and pending home sales came down 2.9%. Inventory levels declined by 10.4%. 

According to one analysis of the Covid-19 impact on the residential market in NYC, property prices remain largely unaffected despite a downward movement in terms of transactional activity. However, the pricing trends remained firmly positive in places like the Bronx while the NYC median sale price remained steady above what was seen over the same period in 2019.

Some Recent Bronx Deals worth Noting

Most developers venturing into the Bronx are targeting entry-level buyers, or renters seeking quality apartments in a new and growing neighborhood. Compared to the other NYC boroughs, quality housing in the Bronx remains extremely affordable. Even though the borough is still a long way away from rivaling the other boroughs, specific neighborhoods are beginning to catch up, especially in terms of pricing. In the South Bronx, pockets are quickly becoming popular destinations for new multifamily residents, new bars, restaurants, coffee shops, and trendy nightlife. 

Although the overall New York City real property market may be experiencing a slowdown, you can still get funding if you have the right deals. This makes it critical to analyze the available buying opportunities on a case-by-case basis as you continue monitoring the market.  For example, despite the Covid-19 impact on the market, April 2020 saw many deals that included a pair of rent-stabilized buildings located in the Bronx. For example, Prana Investments is buying two buildings at 1226 and 1240 Sherman Avenue for $17 million from the Morgan Group. Both the buildings stand six stories tall with 123 units overall.

Conclusion

According to housing experts at Realtor, in 2020, the Bronx housing market is a buyer’s market. This means there are generally more active homes available for sale than buyers. As of July, there were 1,957 homes for sale in the borough, of which 123 were new week-old listing. The Bronx has 44 neighborhoods. Morris Park comes in at a median listing price of $799K, which makes it the most expensive neighborhood, while Pelham Parkway is the most affordable with a median listing price of about $250K. 

There is no secret to why the Bronx holds much potential for investors. The newfound popularity of the borough stems mainly from its proximity to Manhattan combined with several other plusses. These include reduced crime rates, climbing rents, and an influx of capital. These factors all play an important role in a successful investment strategy.

Interested in investing in Bronx Real Estate? 
Check out these investment opportunities we’ve identified. 

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