Buying an apartment building in Brooklyn, New York

[Account Closed]

Hi,

My name is Phil and I am new to real estate investing in the US, although I own property in Bermuda where I live.  My adult daugthers' live in Brooklyn, NY where they rent an apartment and I'm investigating whether it makes sense to buy an apartment building, as an investment, in which they rent a unit rather than pay rent to someone else.  I have listened to Brandon's Beginners Guide to Real Estate Investing which i found extremely helpful, but have been unable to find a site on the internet that lists apartment buildings for sale.  I could contact a local real estate agent, but would first like to understand the various types/ sizes of aparment buildings on the market, their costs, locations, financing options, etc.  I would very much appreciate any information one could offer.

Many thanks,

Phil

[Llewelyn A.]

@Account Closed

Hi Phil.

I am a Brooklyn Investor with several multi-family properties that I have bought within the last 2 decades.

You will need to know your goal and determine whether or not it will fit with purchasing a Brooklyn, NY multi-family.

If you read through my posts, you'll find a lot of information on the differences between at least two different kinds of investment strategies. 1) Investing for Cash Flow NOW and 2) Investing for Cash Flow for the Future.

Brooklyn is not a 1) Cash Flow NOW investment. It's definitely a cash flow for the Future as you won't be able to cash flow your investment until the rents move higher in the upcoming years.

Many call 2) the Appreciation Game.... but really, the value of an Investment, in General, does not Appreciate if the rent roll does not go up in time.

As a real example, in 1999, one of my properties had apts which rented for $500 per month. 18 years later, those same apts rent for $1,900 per month.

Keep in mind that past results do not ensure future results. However, my partners and I are in contract to buy another multi-family property in Brooklyn.

Another thing to look out for is Rent Stabilization or Rent Controlled buildings. Your Property Taxes will be abated for a duration of time, but as exchange for that advantaged treatment, the rental increases for apts in these buildings that are rent stabilized/controlled are limited.

The rents are determined by a Board known as the Rent Guildlines Board of NYC

Two years ago, they ruled rents should have a ZERO increase. Last Year, I believe it was a 1% increase.

When you are investing for 2) Future Cash Flows, obviously, if the future cash flow looks bleak, as in these kinds of increases from the ruling of the board, it affects the Value of the Investment Property.

When you start looking for your own Brooklyn Investments, you will see that typically, rent stabilized buildings are generally buildings with more than 4 units that have NOT been recently built. However, some recently built buildings may fall into Rent Stabilization due to accepting the Tax Abatement.

You will tend to find that buildings under 5 family in NYC will be much more expensive that building over 4 units, mainly because of Rent Stabilization.

It's also a pain to manage because of the rules and regulations that you must follow and your interaction with the Division of Housing & Community Renewal (DHCR).

 Hopefully you will spend a lot of time to really look into these aspects of investing in NYC. Like any big Metro, investing can have a lot of options but also a lot of landmines that you did not expect to navigate through.

Good Luck!