Using data to make informed decisions.
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First Time Home Buying+
Know the Process
Buying in NYC is a process unlike any other city. Our clients know exactly what they are getting into and how to navigate through the buying process, ten steps in advance. We educate and anticipate to avoid pitfalls. Our team of advisors will guide you efficiently from the beginning of your search to closing, with referrals to everyone you'll need including attorneys, bankers, and inspectors, so you can be freed to focus on your new home.
Know the Data
How do you know if it's a good buy? We will show you the immense amount of data and analysis that we put into helping you answer that question. No more shots in the dark. While the investment potential of a property is only one factor in the decision-making process, it's still important to know what the market thinks about the property. The below is just a subset of the data you'll want to see tailored specifically to your decision: How does the property compare to others in the area (SEE GRAPH BELOW)? How has the building performed over the years compared to others in the area? What's happening now in this neighborhood versus comparable neighborhoods?
Get the Tools
We've created a custom rent vs buy model that can help you compare properties, calculating total monthly payments, tax advantages per month, principal paydown, and appreciation potential. It will also help you understand how long you'd need to hold the property before you breakeven after factoring in all the advantages of ownership. Knowing whether it takes 2.5 yrs or 5 yrs to breakeven can weigh heavily into your purchase decision. Many intuitively understand that owning is better than renting; we show you the numbers.
A Fundamentally Sound City
Investors buy NYC real estate for safety and appreciation. It’s less volatile than other markets and sees steady growth over the longterm at around 6% per year. Its resiliency can be attributed to the fact that it is at the top of the list for so many industries: financial, fashion, theater, tech, education, food, etc. NYC is the culture creation capital of the world. This, of course, means that buying real estate here comes with a heftier-than-most price tag making the minimum price of an entry-level investment around $500,000.
Choose Safety or Growth
The already wealthy choose NYC to preserve their capital — they know that the downward risk is relatively low and capital appreciation over the longterm is their goal, as opposed to short-term speculation and cash flow. For those looking to build wealth quickly, few other regions can boast consistent gains in home values. When you buy right and buy into an upward trending neighborhood, properties can easily appreciate 5-15% on an annual basis. We leverage data to help you understand WHY we believe certain areas are "safe" bets, while others are positioned to experience high appreciation in the short term.
Why Real Estate: Leverage and Tax advantages
Try giving your stock broker $200,000 and then ask him/her to buy you $1,000,000 worth of stocks. It doesn’t work that way. Our system is rigged to encourage real estate purchasing for homeowners and investors. When you control a $1M asset for only $200,000, the gains you receive as a proportion of the cash you spent is 5x. AND you get tax benefits for doing it. For instance, a 6% appreciation after Year 1 means you built $60,000 in equity by putting only $200,000 to work for you -- a 30% gain. And when you’re ready to move to trade up your property to the next emerging neighborhood, you can do so completely TAX FREE via a tax deferment vehicle called 1031 Exchange. OR instead of trading up, you can pull cash out of the equity gained in your property TAX FREE by doing a cash-out refinance. And, by the way, the money you borrowed to purchase the property is being paid back by someone else -- your renter -- the entire period of ownership. There’s no other investment vehicle like real estate.
Selling a Property+
Every listing is like a puzzle — make the right moves to maximize it’s value. The 3 pillars of a listing are: Price, Strategy, and Execution. Appropriately pricing is not an exact science — the standard deviation could be (+-)5-10%, which means you could be leaving money on the table. We can use data to DEFEND your price as well as play OFFENSE to obtain a higher price than your building’s own history can confirm. It's not about making up a fictitious price; it's about knowing the team you hired has the skillset to look at every angle possible to maximize value.
Strategy involves the OPTIMIZATION of pricing, timing, market distribution, and careful analysis of the data in order to position your property to achieve the best possible outcome for you. Speed and certainty may be more important than an extra $10,000. Presenting the right data to a prospective buyer in the right way (see below) can drastically increase your chances of an optimal outcome.
The level of service you receive is a function of the skillset and experience of your team. We are former attorneys, project managers, real estate developers, investment bankers, and consultants with engineering degrees, law degrees, and ivy-league MBAs. We are raising the bar of our industry.
It's New. What Can Go Wrong?
Not all new developments are created equal. Even past performance of a reputable developer, doesn't guarantee future construction quality. Did you know that some developers have a specialist that only does sheetrock? The details matter and we can help you discern quality and how it compares to other projects.
The 2BR in the new development you've been eyeing has 200 units. How many are 2BRs and how many are in the same line as the one you're considering? Which line is the best in the building and does the pricing reflect this? When looking at new development, it is imperative that you review the entire offering of the building BEFORE you start negotiating so that you can see the unit of interest in context with the rest of the building. You'll want to know if there will be 30 units of the same line and how many have sold and at what price (SEE BELOW). This is called "shadow inventory" -- inventory that is there but isn't listed on the market. Sometimes the best units are withheld from the market unless you know how to identify them.
Know How to Negotiate
Since we are real estate developers ourselves, we know the mindset of a developer. A developer has to keep investors happy, manage construction costs and timing, deal with their lender(s), and preserve their reputation. Timing is more important than ever and there are discrete windows of opportunity in every development sales cycle. If you're after the best inventory, then you need to be early. If you're after the best deal, then you need to know when a development is "ripe" to offer the biggest discounts. And since closing cost structure is different than for traditional resales, you'll want to have a plan before beginning a negotiation.
Partnering with a Developer+
More Than a Broker
Ever see an amazing townhouse deal that needed too much work than you were comfortable taking on? What if you had access to a professional team that could help you execute your vision? The Founder of The Formation Team, Daniel Chun, is also the co-founder of Eagle Street Development, a boutique NYC-based development group specializing in small-to-medium sized projects. Our wheelhouse includes ground up construction of 25 x 100 lots and gut-renovation of existing townhouses and multifamily buildings into condos and rentals. Our team consists of an architect, a construction manager, a real estate agent, and a property manager -- so we bring expertise from all domains and can effectively control the components of a project from A-Z.
Think of us as an execution partner. We can help you find a good deal AND develop it for you. This means more than hiring a contractor. There are large economic advantages to developing a property, which is why real estate developers exist. If you're an investor, instead of taking your chances by taking on the entire project yourself, we can help you execute on it and share the profits. Our industry relationships and expertise allow us to build cheaper, faster, and with higher quality than what you could find in the retail market. We are doing it for ourselves now and have ongoing partnerships with other investors. We can develop properties together.
Invest With Us Passively
The other way to partner with us would be to invest in one of our projects, completely passively. We evaluate deals every day and cherry pick the best ones to present to our investors. This entails typically an investment of around $100,000 with an IRR to investors of 20-30% IRR (annual return). Some of these projects pay a 10-12% coupon (annualized) on a quarterly basis along the way. Investment holding periods range from 18 months to 5 years. This option is the best for investors with limited capital and time, but still want to take advantage of NYC real estate.