It is well-established that tremendous wealth can be built through owning real estate, particularly in the world’s most desirable cities. The median price of a Manhattan condominium, for instance, has increased in value by over 500%over the last twenty years. At Compound, we believe the future will yield similar results.
But here’s the catch: In order to participate in this appreciation you need to hand over your life’s savings.
Even if you can muster the enormous down payment, many people forget or fail to realize that real estate ownership requires significant capital on a monthly basis.
Interest, taxes, and maintenance each month can often add up to more than twice as much as you would have spent on rent for a comparable unit. You also have to give up the flexibility of moving.
And oh yeah, if something breaks, I hope you have some money left over to fix it. All of this amounts to a pretty big trade-off.
Does it still make sense to buy an apartment?
A few years ago, the New York Times built a widget to compare the costs of homeownership to renting. We used this widget recently to see how today’s market stacks up (our inputs are below) for a $1 million apartment. According to the NYT widget, the break-even rent on a $1 million apartment is $4,450 per month. In today’s market, the average rent for a $1 million apartment is approximately $3,000.
In a market like Manhattan, it’s clear many people are essentially paying extra to own their apartments.
But with little to no interest in the bank and a volatile stock market, putting money into real estate still seems like one of the most indisputable methods to earn capital appreciation.
But, what if you could actually have it all?
What if you can have the lower costs and flexibility of renting but still realize the long-term economic benefits of homeownership?
We had this precise goal in mind when we created Compound and launched NY Residential, a real estate investment trust focused on acquiring a portfolio of Manhattan apartments. When you invest in NY Residential, you are able to invest in Manhattan apartments and build wealth as the market appreciates without all of the downsides of homeownership.
Soon, you’ll be able to diversify your real estate holdings across different markets and own a stake in your favorite cities around the country.
About Compound Asset Management:
Compound is a venture capital-backed asset management firm that creates residential real estate funds designed for the next generation of investors.