Escaping the rat race in New York City

[Gianluca Rossi]

Hi,

This is my first post in this forum, so nice to meet you all, and I'm really eager to learn from you!

I'm in the lucky situation to have some savings set aside and am thinking about investing in real estate to diversity my portfolio and make my first step towards escaping the rat race. Specifically, I'm thinking about house hacking in New York City, likely in Brooklyn. I'm targeting multi-family properties in Bed-Stuy, Bushwick, and Clinton Hill, but open to suggestions on other locations where better deals can be found.

My current rent is $4,600/month (+ bills) and I would like to find a property that would allow me to lower my housing costs. The idea would be for me and my family to live in one of the units for a year at least, and then consider moving to a better property and renting out the unit where we were living. Once we leave the property, the cash flow from all rented units would hopefully be enough to cover the monthly mortgage payments, and hopefully, even make a little profit.

That said, I'm struggling to find good deals in those areas, as properties go for close to $2M and rents are currently low. The future cash flow of the rentable unit(s) is hard to estimate, as there is quite a lot of gentrification going on and these unit(s) would be on the high-end of the market. In the long term, I think it shouldn't be a problem to find good tenants that could pay a little more than the average price in the area ($2,300 for a 2 bedroom), for an apartment that is considerably better. In the short term though, I think this could eat some of the cash flow.

My plan B would be to continue to live in the property for more than 1 year if the market continues to be weak and I struggle to increase the rent enough to make the property profitable.

Do you think this is a robust plan? Do you have any suggestions in terms of areas where I should focus my attention?
 

[Abel Curiel]

Hello @Gianluca Rossi and welcome to the BP forums!

I think your strategy is solid. The goal for Househack #1 in NYC should be to lower your current living expenses, save capital and use that saved capital + equity to get into Househack #2. 

Another reason I like your strategy is because you'll gain acquisition, project management and property management experience on Househack #1... experience that will help tremendously when you look to expand your portfolio and build systems around your REI business.

You should be able to find options in the areas you mentioned although Clinton Hill may have few results below the $2M price point. If you're searching Zillow, Trulia, Streeteasy and other 3rd party sites, you may not have the most updated information unfortunately. Other areas to consider are Crown Heights, Weeksville and Flatbush.

The best property type to target would be a multi-family with an accessory unit (i.e. full-finished basement/garden unit).

Best of luck to you moving forward!

Abel