Like their name says, pre-war buildings are a particular kind of real estate property that were built in New York City before World War 2. To be exact, they tend to share a particular set of characteristics that make them appealing not just to tenants but also to rental property owners. (1) As a result, if you are thinking about becoming a real estate investor, you should give some serious thought to investing in pre-war buildings.
Here are 10 reasons to invest in prewar buildings:
1. Real estate properties can be bought using a combination of cash and credit, which is an enormous benefit compared to how most investments have to be bought using cash and nothing but cash. As a result, you can start investing in real estate properties sooner rather than later, which is particularly important because the nature of compounding interest means that the sooner you start, the more you can expect to earn over time. (2)
2. Of course, buying real estate properties using a combination of cash and credit has a problem in that part of the revenue will have to be used to make the monthly payment on the mortgage. However, this should be seen as an advantage rather than a disadvantage because it means that the investment will be earning a higher and higher rate of return as more and more monthly payments reduce the size of the principal and thus the size of the interest charged on the principal. (2)
3. Real estate properties come with a lot of tax benefits, which can be used to lower the amount of taxes that you are expected to pay on your annual income. For example, you can deduct no just the depreciation of your real estate properties but also the interest payments that you have to make on your outstanding mortgages. Better still, some prewar buildings are considered to be historic buildings, which means even more benefits. (2)
4. Rental real estate properties are an excellent choice of investment for people planning for their retirement. This is because rental real estate properties earn a constant stream of revenues over time rather than a single lump all at once when their counterparts are resold on the real estate market. As a result, people planning for their retirement have less need to fear that their income will run out because of bad financial management. (2)
5. Pre-war buildings have a lot of character in the sense that they have unique styles as well as unique layouts, which is a stark contrast from most of their successors, which have been built according to standardized templates. As a result, prewar buildings are extremely appealing to a particular kind of tenants, which in turn, increases their rental incomes as well as their occupancy rates. (3)
6. Furthermore, prewar buildings tend to have plaster walls and poured concrete floors, which make them much more soundproof than their successors. This is important because loud noises as well as similar disruptions can cause the tenants in a building to flee in droves, thus causing its revenue stream to plummet. By being more soundproof, pre-war buildings make more stable investments, which is important for those who value reliability and shy away from risk. (3)
7. Many pre-war building boast old but well-made fittings and furnishings that cannot be found in their successors. Better still, many prewar building boast detailing as well as other forms of ornamentation that provide them with a charm that cannot be easily replicated in today’s buildings. Once again, these factors make them attractive to a particular kind of tenants, which in turn, makes them better earners. (3)
8. Since pre-war buildings have existed for so far, their problems are well-known, which is not something that can be said about most investments. As a result, even though they can be excellent earners, they can also be stable earners because you know what you can expect from them. This is a major advantage because most investments emphasize one at the expense of the other. (3)
9. There is enormous demand for pre-war buildings. However, there is a limited number of prewar buildings out there, meaning that demand will push their prices higher and higher instead of prompting builders to build more pre-war buildings because that is impossible. In contrast, there is a limit to how high the prices of other real estate properties can rise because builders will respond to such prices by increasing their inventories, thus bringing them back down again. This point is particularly important because New York City is attractive for not just American investors but also for foreign investors, meaning that there is even more potential for prewar buildings to appreciate in value on New York City’s real estate market. (4)
10. Pre-war buildings tend to be strong and well-built, as shown by the fact that they are still in excellent condition after decades and decades of constant use. As a result, you can count on them to continue providing you with rental revenues for years and years to come without breaking your budget in the process by requiring a constant stream of repairs and replacements as problems pop up one after the other. Simply put, prewar building are tried and true rental real estate properties, meaning that you can count on them to perform for you as they have performed for their previous owners. (4)
With that said, it is important to remember that people choose to invest in real estate properties for a wide range of reasons, meaning that pre-war buildings may or may not be right for your investing priorities in spite of their popularity. As a result, you should always make sure to exercise your own sense of judgment when it comes to real estate investment because you are the one who understands your needs and circumstances the best, though that does not mean that you should ignore the advice of those who possess both the right expertise and the right experience needed to provide useful insight.