The Bronx is not burning

Is the Bronx still a good place to invest in real estate? Now is arguably better than ever to find value under the right circumstances. The strongest suggestion I make to clients looking for new multifamily investments in the Bronx is to look for properties with a very low average rent per room. With proper management, this tactic offers an investor long-term potential for steady and stable growth. However, there are caveats to this approach. Often these scenarios demand higher equity requirements. This is because the building's net operating income is lower as a result of lower rents and does not support a high loan-to-value ratio. Additionally, these types of investments typically require capital to improve the property in order to command higher rents. Thus they will not show a return the first several years of ownership. Real estate is obviously a long-term investment horizon, typically rewarding those who hang in there over time. As lenders are presently financing only cash-flowing assets, those who come in with higher equity and gradually maximize the income over time realize the payoff. For example, my team just sold 1275 Edward L. Grant Hwy., a 6-story elevator building with 61 apartments and 4 stores in the Highbridge area. The average rent per room was $209, which was 25-30% under market rate rent. The property traded for $3.625 million, which amounts to 5.6 gross rent multiplier and $57 price per s/f...a solid value for the new owners. Despite these points, the compelling reason to invest in a lower rent apartment building is the ability to grow the income. Buildings appreciate for many reasons, including gentrification, population growth or New York's consistent high demand for rental housing. The main way for a building to appreciate in value is an increase in income. This broker's advice: "Buy low rents and sell high." Colin Rowen is sr. director at Besen & Associates, New York, N.Y.