Parents giving me ~$5mm to help them invest. Any suggestions?

Buy a couple of $1.5 million apartments in a hot nyc area and rent them out to pay off the taxes, while they grow in value. 5-10 years that apartment is going to be worth much, much more.

yeahright:

Buy a couple of $1.5 million apartments in a hot nyc area and rent them out to pay off the taxes, while they grow in value. 5-10 years that apartment is going to be worth much, much more.

What's a typical annual return of a residential real estate investment? I've always wondered about this and have really no knowledge.

To be specific, what's the typical IRR of your growth in assets (not just your cash flow).

I've always assumed real estate generates better return from the stock market because it's much less liquid, but i don't actually know the numbers

I've looked into RE in Manhattan, but I can't make the numbers justify it without assuming 3-5% inflation-adjusted growth every year, which seems optimistic at current price levels.

Despite what people say about rents here, renting is still much cheaper than buying in the city.

parvenu:

I've looked into RE in Manhattan, but I can't make the numbers justify it without assuming 3-5% inflation-adjusted growth every year, which seems optimistic at current price levels.

Despite what people say about rents here, renting is still much cheaper than buying in the city.

Are you looking into attending school in NYC? If so then buying there might actually make sense plus you can personally check on the properties on a regular basis to make sure everything is in order,tenants paying on time,not vandalizing the place etc.

Having said that, the trophy Manhattan/SF properties that are nowadays considered "fool-proof" investments would cost you more than $3mm a piece, think 15 CPW or the brand new ONE57. Also you mentioned your parents want to get their money out of Asia. Which country are you referring to? Many Asian countries, and China in particular, put considerable restrictions on capital outflow and that can impact the type of investments you can make abroad.

Heard this up and coming 15yo hedge fund investor is taking LPs....

I hear Tokyo real estate is where it's at these days...

HFFBALLfan123:

Heard this up and coming 15yo hedge fund investor is taking LPs....

LOLLLL!!!!!!!!!!

If you are really looking for RE look at Barcelona.

brandon st randy:

parvenu:

I've looked into RE in Manhattan, but I can't make the numbers justify it without assuming 3-5% inflation-adjusted growth every year, which seems optimistic at current price levels.

Despite what people say about rents here, renting is still much cheaper than buying in the city.

Are you looking into attending school in NYC? If so then buying there might actually make sense plus you can personally check on the properties on a regular basis to make sure everything is in order,tenants paying on time,not vandalizing the place etc.

Having said that, the trophy Manhattan/SF properties that are nowadays considered "fool-proof" investments would cost you more than $3mm a piece, think 15 CPW or the brand new ONE57. Also you mentioned your parents want to get their money out of Asia. Which country are you referring to? Many Asian countries, and China in particular, put considerable restrictions on capital outflow and that can impact the type of investments you can make abroad.

I work in NYC. If we bought a place here I'd most likely move in. But with property taxes and common charges, I don't think I'd actually be saving any money overall vs renting.

China. You're right about the restrictions, but we can get around it.

NYC trophy properties will have an annually adjusted cap rate. Year one you will be looking at a cap rate around 1 to 2% by year 5 you can be looking at 14% between pretty much guaranteed rent rate increases on a yearly basis and equity inflation its a great investment. Given you can hold out a year or two of negative cash flows.

what percentage of their assets is this, and why are you asking a message board?

real estate - yes. ETFs - yes. Mutual Funds - yes. HFs - yes. Private Equity - yes. Yes to all - DIVERSIFY. I have about the same amount and would never put all in one place, or even 50% in one place.

heister:

NYC trophy properties will have an annually adjusted cap rate. Year one you will be looking at a cap rate around 1 to 2% by year 5 you can be looking at 14% between pretty much guaranteed rent rate increases on a yearly basis and equity inflation its a great investment. Given you can hold out a year or two of negative cash flows.

$1.5m is not a "trophy" apartment in Manhattan and won't magically outperform the median.

14% by year 5 is not realistic. Large negative cash flows on a highly-levered asset requires tremendous expected real appreciation in years 3-5. Purely speculative.

Contrary to public outcry, inflation-adjusted Manhattan rents peaked in 2001. NOI on a real basis is not increasing.

Likewise, nominal Manhattan condo price per square foot peaked in 2007. Inflation-adjusted, the numbers are pretty ugly.

justin88:

heister:

NYC trophy properties will have an annually adjusted cap rate. Year one you will be looking at a cap rate around 1 to 2% by year 5 you can be looking at 14% between pretty much guaranteed rent rate increases on a yearly basis and equity inflation its a great investment. Given you can hold out a year or two of negative cash flows.

$1.5m is not a "trophy" apartment in Manhattan and won't magically outperform the median.

14% by year 5 is not realistic. Large negative cash flows on a highly-levered asset requires tremendous expected real appreciation in years 3-5. Purely speculative.

Contrary to public outcry, inflation-adjusted Manhattan rents peaked in 2001. NOI on a real basis is not increasing.

Likewise, nominal Manhattan condo price per square foot peaked in 2007. Inflation-adjusted, the numbers are pretty ugly.

What's the best source for updated NYC/Manhattan RE prices/charts?

justin88:

heister:

NYC trophy properties will have an annually adjusted cap rate. Year one you will be looking at a cap rate around 1 to 2% by year 5 you can be looking at 14% between pretty much guaranteed rent rate increases on a yearly basis and equity inflation its a great investment. Given you can hold out a year or two of negative cash flows.

$1.5m is not a "trophy" apartment in Manhattan and won't magically outperform the median.

14% by year 5 is not realistic. Large negative cash flows on a highly-levered asset requires tremendous expected real appreciation in years 3-5. Purely speculative.

Contrary to public outcry, inflation-adjusted Manhattan rents peaked in 2001. NOI on a real basis is not increasing.

Likewise, nominal Manhattan condo price per square foot peaked in 2007. Inflation-adjusted, the numbers are pretty ugly.

Good call. According to curbed.com year to year Manhattan average rent increased by 3.5% which is roughly consistent with inflation. Brooklyn, or more precisely the hip parts of it, is the borough that has been seeing fast and furious rent increases. So much so that people are finding themselves being priced out of Williamsburg and have to move to East Village. Some crazy reverse gentrification going on there.

BTW, do you work with real estates? You seem pretty knowledgeable about this subject.

Jimbo:

what percentage of their assets is this, and why are you asking a message board?

Yeah, this. Why would you ask a bunch of college kids here and not an actual advisor.

Bobb:

Jimbo:

what percentage of their assets is this, and why are you asking a message board?

Yeah, this. Why would you ask a bunch of college kids here and not an actual advisor.

Just wanted to see if anyone had some interesting ideas. There are some smart senior members on the forum. I'm obviously not going to be investing in Barcelona RE or whatever that one guy suggested.

Not interested in hiring a financial advisor.