It’s estimated that 15% of the real estate transactions that occur in Manhattan are carried out by foreign buyers. These individuals are often in search of diversity and safety by investing in Manhattan real estate. Often, they are searching for a home for their child studying abroad, a second home for themselves, or an investment property that will provide yield and capital appreciation. In all cases, these buyers have unique needs and concerns. If you’re a foreigner looking to buy real estate in Manhattan, here’s a checklist to guide your search.
- Decide What Type of New York Residential Property You Want
- Assemble a Team of Experts
- Make a Wish List
- Determine How Much You Want to Spend and Whether to Take a Mortgage
- Make a Focused Search
- Know the Rules and Regulations
1.Decide What Type of New York Property You Want
Manhattan’s residential real estate market is made up of three basic property types: condominiums, co-ops, and townhomes. Co-ops make up most of the market, but their rules of ownership and approval process for new members can make the purchasing process of a co-op residence just about impossible for foreign buyers. Many foreign investors buy newly developed condos in Manhattan, secure in the knowledge that if they want to rent out the property either at purchase or eventually, they can do so without any restrictions, in contrast to coops. Others want a townhome or brownstone residences, but these can be expensive options, starting around $8 million.
2. Assemble a Team of Experts
A luxury real estate broker isn’t the only expert a foreign buyer of real estate in Manhattan needs to work with. It’s also important for a buyer to develop relationships with a lender for competitive-rate real estate financing, a real estate attorney, and a certified public accountant (CPA). We have great relationships with professionals in these industries to help our clients work with the best of the best from the very beginning.
3. Make a Wish List
It’s important to confirm with your broker which items on your Manhattan residential property wish list are non-negotiable, and which amenities or features you might be willing to compromise on. This will not only help focus your search, it will also help you determine the expected price of the property. A rare view of Central Park will exponentially increase the sales price of an apartment. Therefore, it’s important to figure out those things that are a must and those things that are just wishes.
4.Determine How Much You Want to Spend and Whether to Take a Mortgage
Once you have made a wish list, you will have a better idea of what the apartment that you want will cost. At this point, a foreign buyer may want to consider obtaining a mortgage, which would provide leverage to investors. Real estate is one of the few investments that allow investors to use other people’s money (i.e., the bank’s money) to buy the property. Retail banks like HSBC and Wells Fargo offer mortgages to foreign nationals up to 70% LTV, which means with a 30% down payment. Generally, foreign buyers will pay a ½ percent higher interest rate than local buyers. In addition, some private banks like JP Morgan Private, BNY Mellon Private and Citi Private offer mortgages at similar rates to US citizens.
5. Make a Focused Search
Once you know what you’re looking for and how much you are willing to spend, it’s time for you and your broker to start searching for the right opportunity. Depending on your specifications, there might be a lot of options to review, or you might spend time waiting for the right property. Don’t worry, experts like us know that for the dedicated foreign buyer, the right Manhattan real estate investment opportunity always comes along.
6. Know the Rules and Regulations
Before beginning to search for residential property anywhere in the United States, it’s important for a foreign buyer to be aware of the rules they must comply with, how the current tax code will affect their purchase, fees and other regulations, and more. While a broker or tax attorney may understand every detail, the foreign buyer should still have a grasp of the basics for their own safety. That’s why we think it’s best to partner with a team that is experienced in serving foreign buyers and explaining these details in many different scenarios.
Ultimately, this checklist is only the beginning of a foreign buyer’s search for residential property in Manhattan. With these details in hand, any individual will be prepared to make an offer on residential real estate when the right opportunity comes along. If you have questions about these or any other aspects of becoming a foreign investor in Manhattan residential real estate, we are here to help.
Still have questions about the foreign buyer's process? Feel free to contact us and check out our resources:
Manhattan Real Estate News