Buying in the US :Two apartment blocks in Manhattan come with a letting deal. Bernice Harrisonreports. Right: Denis Jacobson on what investors must know about US tax
The influx of Irish property buyers into Manhattan hasn't gone under the local radar. An article in the New York Times in May commented on the volume of Irish investors in the market.
The weak dollar is of course a big draw, and price tags of properties no longer look so daunting.
However, novice investors - or those whose only experience is of buying at home - can be in for a rude awakening when it comes to the costs associated, first with buying and then, crucially, with owning an apartment in New York.
Those who are too focused on the old maths of balancing the rental income against a mortgage repayment soon discover that the range of annual fees - from maintenance fees to co-op fees as well as local, state and federal taxes - mean that unless the deal is structured correctly, the rental income might only cover half an owner's annual outgoings on a property.
"It's about capital appreciation, investors have to think in terms of five to seven years," says Darina Heavey, of the Sorrento Group, a Dublin-based asset management company currently developing two major residential buildings in midtown Manhattan: one is a 110-unit, $120 million (€86 million) apartment block near the Empire State Building, being built by a construction company owned by two Kerry brothers - called S34, it's at 47-49 East 34th Street.
The other, 785 Eighth Avenue, is a stunning looking 43-storey, $150 million (€107 million) condominium on Eighth Avenue in the theatre district. The apartments will be sold individually, although one Irish investor has already bought half of one of the buildings.
Sorrento has developed a package for buyers interested in a hands-off investment, through ownership of Bridgestreet, an international corporate letting company. Sorrento will lease apartments back from buyers for a period of 10 years, fit them out to corporate standards and take over all letting and management responsibilities.
Costs, says Heavey, are just over 6 per cent, with projections of a net return of 5 per cent. "With that kind of yield, a 75 per cent mortgage will cover all costs," she says.
"All our buildings come with a 421a tax abatement certificate, and that's important for investors," says Bryan Turley, CEO of the Sorrento Group, indicating that novice buyers really do need to take advice from people who understand the US property market.
Capital growth in New York is 7 per cent annualised, he adds, mentioning another figure that investors will look to when weighing up investment opportunities and one which they will need to consider when comparing investments in other US cities where capital growth is lower.
