Think of a posh, luxury penthouse in Midtown Manhattan. Wine glasses clink, and perhaps the music of a jazz trio serenades the guests. Such a party characterizes the height of the American dream—or not. The owner of that penthouse, like the owners of many other luxury Manhattan homes, may very well be a foreign investor. Foreign ownership of properties in New York City is growing, as global investors increasingly turn to the city as an attractive investment.
Edward Langley, founder of The Hollingsworth Group, shared with us some of his knowledge and expertise on the foreign buyer scene in New York. He has worked in New York City real estate for more than 12 years, and he says that just recently the buying market has started to heat up again. In fact, properties in New York City are selling faster than they were before the bubble burst in 2007 and 2008. Significantly, about half of his clients are foreigners interested in the city’s properties. Below, he sheds some light on foreigners who just can’t get enough of the Big Apple.
Why do people want to buy property in New York?
They love the culture of Manhattan. They are attracted by the vibe, action, and diversity of this melting pot city. Those ingredients make them feel at home in New York City.
Foreigners also know that the real estate market is stable and that it appreciates. They often have friends who have lived in New York City or bought there before.
Some are world travelers or own homes in various cities, so they feel that their “journey” is not complete until they own a part of New York City. But I would say the culture, coupled with the fact that it is a good stable investment, are the main reasons.
Can you tell us about your foreign clients who invest in New York City real estate?
I have four types of foreign clients. The first type buys in New York City as an investment property because they love the stability and chance for appreciation of the city’s real estate market.
Some buy because they like to visit a few times a year and want a pied-à-terre or place to stay.
Finally, some buy here because they do business in New York and want a regular, consistent place of their own to stay.
Where do these clients come from?
They pretty much come from all across the globe. My last three clients were from Rome, Moscow, and London. I have quite a few from the Far East as well. But they come from every continent, literally.
What are some of the complex issues that come from dealing with foreign clients?
Ownership is one of the main issues we deal with. Some buildings do not allow clients to buy as an LLC, (Limited Liability Corporation), a common way many foreigners purchase property in the States. Certain foreign banks will not lend money to people who want to buy in New York City. Some countries tax their citizens heavily when they purchase in New York City, so we have to figure out a legal way around these issues.
In addition, managing their rental tenants and other logistics can turn into problems. They need to know where they buy furniture for the apartment. Who can help them renovate their property, how they can find the right interior designer or architect, where can they get a great maid, and so on.
What about financing the property? Have you ever had a problem with the actual purchase of the real estate?
Yes. I usually put them in touch with mortgage professionals, but I try to quarterback the deal as well.
One deal that sticks out involved a group of foreign investors who wanted to buy a property, but they only wanted to put down 20 percent. Foreign banks would not do it and most US banks did not want to touch it, for many reasons. I finally found a bank that would do it, but they wanted 40 percent down and the group of investors would not work with that.
I came up with the idea of taking a home equity loan out of one of their current New York City homes, and using it to put 40 percent down on the new apartments. Because one particular member of the investor group owned most of the property they were trying to take the equity loan on, it became complex. In a sense we were using mostly his money to finance the new apartments for the entire group of investors. We had to draft various agreements to make this happen, and it was a very complex deal.
Is foreign investment in American real estate a big market? And do you foresee any changes in this market over the next 10 years?
It was a big trend up until late 2008. Then during 2009 to 2011 the market really slowed down. The problems with the banking industry and the fact that various currencies were deflating seemed to cause this.
But things have recently begun turning around and once again, about half of my sales are coming from foreign buyers at the current time. I can’t say for sure that they will keep buying here, but they probably will. As long as we have great real estate coupled with unparalleled cultural and business opportunities, they will always want a piece of New York.