Eran Elhanani is top producing Realtor and the President & CEO of Esquared Realty in New York city. In this article he discusses the housing market in New York and how investment buyers might be able to best manage the current situation.
Elhanani’s background is not at all congruent with that of the regular Realtor. He has a Bachelor of Science degree in Medicine Science, Computer Science and Math. “I got into the real estate market almost by accident,” recalls Elhanani. “I used to be in the high tech industry and I felt burnt out and wanted a change. A friend of mine suggested real estate, he thought it would be a good fit so I gave it a try. That was 8 years ago and I’ve been hooked ever since. There is nothing that beats the feeling of finding your client a place they love, negotiating it and closing the deal for them.”
Since those early days, Elhanani has really branched out his interests and influence in the NYC real estate market. “I started doing rentals, graduated into sales, represented a developer in a sales office and now I do sales of apartments, buildings and developments sites, as well as management of properties for my investors.” He continues, “In addition I help developers source deals, advise them about the development process and later represent those developments in sales and marketing.”
When asked what he saw happening now in the market and in particular, the investment buyer’s market, Elhanani had a lot to say, “Most apartments sold today are high-end luxury apartments and large apartments. The reason behind this is that land price has doubled or more over the last year or 2 and became very expensive.” He explains, “That creates a situation where the developer buys the land at a high price and after all soft costs, hard costs and financing costs he gets $1500-2000 all in per net sellable square foot (SF). This means he has to sell at $2500-$3000 per SF in average at least in order to make some money and get his investors a good return.”
Elhanani goes on to explain the repercussions this might have on the housing market, “Developers know that where they get the premium dollars is on large luxury apartments so that is what they’re building. In the long term that could lead to a lack of small or affordable apartments like studios and one bedrooms.” He expresses some concern, “I’m also not sure if the market can continue to absorb all the new luxury product being developed now and especially the really high end which includes developments where most of the apartments range from $20M-50M and penthouses go up to around $100M.”
Elhanani then summarizes the situation quite clearly, “The biggest challenge for investors is that the price of an average apartment is going up to $2-3M so there is an entry barrier and the returns might go down since I don’t see the rents following at the same pace.”
Although these conditions do not seem ideal for the average investment buyer, Elhanani does offer some sage advice to those looking to get into the market. “It is better to buy a cheap apartment in an expensive or new building than an expensive apartment in a cheaper or older building. This in regards to investment, appreciation and resale purposes.” He goes on, “Don’t buy an investment property because you like it. Buy it because a renter would like it. This makes it easier to rent or for future resale. It is an investment and not your home.”
Having been a leader in this market for quite some time Eran Elhanani had another golden nugget to share. “It is better to pay a little more per SF for a premium location than a little cheaper for a not so great location. The better location will pay for itself in appreciation, ease to rent or resell and if the market takes a hit, premium areas are normally less impacted.”
In summarizing, Elhanani makes these candid remarks considering his profession, “I would also add that it is crucial to find a real estate agent who is knowledgeable about the market, trends and future developments. Unfortunately, most agents are not very knowledgeable or too greedy.” Elhanani finishes, “I see many buyers making huge financial mistakes by making wrong purchases and losing money in these investments. I recommend buyers really check who they’re working with. Do not choose a Realtor because of the language he speaks, his appearance or the company he works for. Instead judge him by his knowledge, experience and reputation!”
Anyone wishing to speak with Eran Elhanani can reach him via email at firstname.lastname@example.org or calling him directly at (646) 246-6061.