Thinking of Renting Your New Condo? Try Buying a T-Bill Instead

New York City

Condo Conundrum
Oct. 6, 2017

People buy New York City condominium apartments for any number of reasons. To live in them. To give them to their children. To have as a pied-a-terre for visits to the city. To flip them for a quick profit. To hold onto them as a long-term investment. Or to rent them out and generate immediate income. 

This last group is in for an unpleasant surprise, according to a new study by the property listings website StreetEasy. Condo buyers who rent out their apartments are barely taking in what they could get by investing in stodgy, safe Treasury bills, Bloomberg reports

Newly purchased condos that were listed for lease in the second quarter of this year brought their owners a median return of 2.5 percent, according to the StreetEasy analysis released this week. It’s been stuck at that level since the end of last year, the lowest in data going back to 2010. The median yield on relatively risk-free 10-year Treasury notes was 2.25 percent in the second quarter. 

“This is the lowest point we’ve seen in history,” Grant Long, a senior economist at StreetEasy, says. “It’s a steady downward trend.” 

A construction boom and the perceived strength of New York real estate has been luring investors looking for a safe place to park their cash and generate income since the darkest days of the Great Recession. Between January 2010 and June of this year, more than 8,000 condo units were sold and then listed for rent within 180 days of the closing. That investment strategy had promise in 2011, when rental yields peaked at 3.9 percent in the third quarter. But as developers added ever-pricier units to the skyline and the supply of rentals swelled, income prospects for those who buy and lease out condos have been diminishing fast.

T-bill anyone?

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