CityLivingWith the weak dollar, an annual return of 10 percent and a three-year rental guarantee, investing in New York is a seriously attractive prospect. But as Tim O'Brien reports, there are always pitfalls.
For generations we Irish have fled oppression and poverty to New York in the hope of a better way of life: now it seems we just want to buy the place.
New York may be famous for the number of astonishing things you see there: this is mainstreet world, the city that never sleeps and a thousand other clichés, but the latest big thing is how affordable property is for the Irish investor.
True, if you want an apartment on Central Park next to Jackie O's old haunts it will cost you millions, but there are many downtown apartment blocks where a good two-bedroom unit can be had for around €300,000. Remember, that's about $365,000.
Further out from Manhattan but still just the other side of the Hudson River, Jersey City is undertaking a huge waterfront urban regeneration project. New Yorkers marvel at how the prices have risen already but property here is very accessible by Irish standards.
Respectable one-bedroom apartments in areas close to the Path train - downtown Manhattan in 12 minutes - range in price from about $110,000 (€90,302) upwards while two-bedroom apartments start around the late $140,000s ($114,930).
The weak dollar and the strong pound sterling - one pound is almost 1.8 dollars - have been an irresistible combination spotted by agents in the UK for some time. Some of the British agents have been taking note of the Irish as investors and advertisements have started to appear in the Irish newspapers for property in New York.
One such agent explains that an investor balancing the prospects offered by eastern Europe and New York must consider wage levels in these countries. In eastern Europe, property is relatively inexpensive, but wages - and maybe rents - are also low.
New York is at least an interesting prospect based on wage levels.
But our agent is prepared to go further: three years of a guaranteed return of 11 percent. This compares with guaranteed returns of just 4.5 or five percent being offered by French vacation companies on resort properties in the Alps, or the rural south.
And then our agent drops in the currency difference. At the time of writing the dollar is trading at $1.21 to the euro. A year or two ago, the euro was trading at 90 cent to the dollar. "If the dollar doesn't recover, it will be the first time in the history of time that it doesn't come back," said the agent.
Enter the pitfalls. As everywhere else get your own lawyer. The importance of this cannot be overestimated. Agents will offer you discounted fees and expediency as a reason to use their lawyers but it is better to have your own.
One independent New York lawyer regularly asked to carry out appraisals on New York property regularly encounters "slipping" as a feature of such deals.
"Slipping" is where the person selling you the property doesn't actually own it. They buy it after you agree to buy it from them, and naturally there is a big mark-up.
Ok, so you expect a mark-up for the local knowledge and the contacts with US mortgage providers, but the lawyer recently came across a deal where a two-bedroom apartment being sold for $158,000 (€129,000) was said to be worth just $110,000 (€90,302) in the independent appraisal.
In this case when the potential purchaser complained, the agent offered to sell the property for $135,000, a premium of $25,000 dollars, just for the pleasure of it.
While this is the point at which many potential buyers pull out, our lawyer has had instructions from Irish clients to proceed. The reasons for this are varied. Some may simply be in a hurry to move money offshore; some are looking for a long-term investment or perhaps want the place for themselves to stay in when in New York. Some even feel that the investment is worth the effort for the gain on the currency exchange and the five percent capital appreciation each year.
Others will contact an agent directly, obtain an independent lawyer and if they do not end up with spectacular rental guarantees, at least they know they are not paying for them out of an inflated purchase price. And there is still the prospect of a dollar recovery.
tobrien@irish-times.ie
Edel Morgan is on holidays
