Syracuse New York Has Treasures for Real Estate Investors

The Mortgage-Pro · Site Admin Joined: 19 Jan 2005 Posts: 2248

By Claire Duffett
Central New York Business Journal

SYRACUSE — Out-of-town, real-estate investors are looking to Syracuse for lucrative income properties and are finding bargains. For 10 years, Syracuse has been the fifth most undervalued property market in the country, according to Chip Hodgkins, a real-estate agent at RE/MAX Masters in Fayetteville.

The bursting of the stock-market bubble five years ago helped to put the Syracuse real-estate market on the radar screen of investors looking for a reliable and profitable investment vehicle.

“The stock-market drop in 2000 set everything in motion,” says Richard Will, president of Hemisphere Holdings Corp., a Syracuse–based, real-estate firm specializing in selling income properties, such as apartment buildings and multi-family houses. “It sent a lot of money out there looking for real estate. [Investors] discovered the most affordable investment properties [are] in this area.”

During the past three years, media exposure and word-of-mouth publicity have drawn buyers from the New York City metro area and from across the country, including California, Michigan, Colorado, Georgia, and Texas. Buyers are attracted to the Syracuse market’s low-cost, high-yield potential, say real-estate brokers and agents.

“They can’t imagine owning a property for this kind of money from where they’re coming from: New Jersey, Long Island, New York City,” says Mary MacKaig, branch manager for Gallinger/GMAC Real Estate in Camillus.

The capitalization (CAP) rate — the ratio of yearly net income to the value or price of a property — is averaging about 7 percent Downstate, according to Will. That’s compared to CAP rates of about 10 percent in Central New York. This means that in Central New York it would take 10 years to recoup the property value in net rental income if the rent stayed the same, while Downstate it would take nearly 15 years.

The CAP rate in the Syracuse area has dropped about two points from 2000, as higher demand for real estate in this area continued to boost prices, Will says. His sales spiked two years ago, doubling from 41 income properties sold in 2002, to 80 sales in 2003. About 80 percent of Will’s income-property sales are to out-of-town buyers, he says. But the area is still generating strong interest from out-of-towners as the prices and CAP rates are still more attractive in Syracuse than in other areas.

The most popular income properties are one-, two-, and three-family homes priced between $50,000 and $110,000. These properties are attractive to buyers because the monthly rent often exceeds the mortgage rate, Hodgkins says. Most buyers looking for income property try to find real estate in the city of Syracuse and its closest suburbs, Hodgkins says. The Tipperary Hill, Strathmore, and Eastwood sections of the city are the fastest-selling locations for income properties. These areas are popular to tenants because they offer a suburban atmosphere and are still close to downtown Syracuse and its entertainment attractions, he says.

Syracuse University and Le Moyne College also assist the area’s growing appeal, says Lynnore Fetyko, CEO of the Greater Syracuse Association of Realtors.

Out-of-town investors often purchase a site before visiting it, and subsequently hire property managers to handle rentals and maintenance. Income properties in need of little maintenance sell immediately, Hodgkins says. He has a client buying two income properties for the price of his home in Georgia. The man visited only one of the houses.

In 2004, Hodgkins’ net sales increased 50 percent, as did his income-property sales, which came almost exclusively from out-of-town buyers, he says.

High demand is beginning to boost real-estate prices in the area. The cost of a residential home in Syracuse jumped in 2004, according to statistics from the National Association of Realtors. The median sale price of existing single-family homes for the Syracuse metro area increased from $94,700 in the second quarter of the year to $102,700 in the third quarter.

Syracuse has been a strong seller’s market for more than three years, says Lynn Petrie, agent at Ellie Hayman r-House ERA in Fayetteville. The speed with which real estate is selling is beginning to dispel the myth that Syracuse has a depressed buyer’s market. Two-family income properties are selling as quickly as two days after they are listed, Petrie says.

Hodgkins sold a three-family home last week for $120,000. Investors placed five offers on the property during the one week it was on the market.

High property taxes are the one factor that detracts from Syracuse’s draw, says David Manzano, a broker associate at the Camillus office of Prudential First Properties.