If you are an investor looking to do a 1031 Exchange in New York, there are many factors to consider. Unlike other locations in the United States, New York Real Estate can be extremely competitive, especially if you are looking to purchase in the Manhattan based areas.
During the past decade, certain sub-markets, such as Brooklyn, the Bronx and surrounding neighborhoods have become very efficient, making it difficult to find a rate of return that would be of typical interest to an investor.
Suburban and tertiary markets such as Albany, Buffalo, Rochester and various areas in Upstate New York offer the ability for higher cap rates and appreciation.
Doing a 1031 Exchange in New York can present challenges, but each investor must determine the criteria and security they desire.
Breaking Down a 1031 Exchange in New York
- Cap Rate – Depending on the City, the Cap rate will adjust. The number represents the return on investment after expenses are paid. Typically, the higher the cap rate, the less stable the location. If the cap rate s lower, the property may present less risk. Properties in Manhattan and Brooklyn offer lower cap rates, while locations in different counties will have a greater return
- Appreciation – The upside in a property must always be take into account. Purchasing in efficient communities will limit the ability for appreciation, since the neighborhood is already developed. However, up and coming areas will offer more value-add opportunities
- Convenience – If you are based on the East Coast, specifically the New York region, transacting a 1031 exchange in New York will make a lot of sense. We recommend purchasing a property within driving distance to your house.
- Stability – Certain investors prefer stability when investing in real estate assets. If your goal is to buy a property with less risk, a neighborhood such as Manhattan or Brooklyn, may be right for you
- Price – Your price range will dictate the location for your next real estate purchase. Highly efficient markets and neighborhoods will be prohibitive due to the cost. This will force an investor into tertiary Cities or various sub-markets. This may be a blessing in disguise, as it will allow for more upside and appreciation in a transaction
Types of Properties to Purchase
When transacting a 1031 exchange in New York, there are numerous properties to consider:
- Triple Net Leases – A tenant will pay the basic rent, taxes, insurance and common area maintenance on the property. Triple Net Properties are very easy properties for an investor to purchase, as they have very little landlord responsibilities
- Multi-Family Residential – These real estate assets tend to be stable investments, but do require property management. If you don’t mind getting your hands dirty, we recommend these types of properties. However, if you prefer not to be awoken at 2AM with a tenant plumbing issue than you may want to look elsewhere
- Single Home Properties – An individual investment unit can be very popular for many 1031 exchange buyers. These units are easy to rent and should generate a stable income for years to come
- Land – Purchasing land is not for everyone. This is a speculative acquisition or more fitted for a developer looking to construct a multi-unit residential or office building
JSG Realty has a great depth of experience in New York Real Estate. Our bread and butter transactions are focused in the tri-state area.
Additional 1031 Exchange Resources
- IRS 1031 Code
- Forbes 1031 Advice
- Forbes 1031 Vacation Homes
- Cornell 1031 Review
- US News 1031 Wealth Accumulation
- Huffington Post 1031 Analysis