Escaping the rat race in New York City

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Escaping the rat race in New York City

Gianluca Rossi
Member since 2021 · 9 posts · 7 votes

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?
 

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Abel CurielBusiness Member
Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
5y

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

REbuild Team - eXp Realty5234 Reviews
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  • Adam Lippa
    Investor · VT · Member since 2020 · 18 posts · 3 votes
    5y

    Welcome Gianluca!

    I am not familiar with the area but as a general rule I am always cautious about assuming I will be renting out properties for more than the average rate (or my expenses will be less than average). I always try to be conservative and think about the realistic worst case. It sounds like you have thought about a few options depending on which way the housing market goes, just spend some time making sure you double check the math and the reasoning if you think you'll be doing better than the guy next to you.  

    Good luck!

    1Reply
  • Andrew T.
    Investor · Brooklyn, NY · Member since 2020 · 13 posts · 8 votes
    5y

    I think it’s a great idea Gianluca, and I have done the same, in Bed-Stuy. 
    If history holds true, hard to go wrong with a brooklyn brownstone. Adam is right to say estimate conservatively, but the good news is if you use covid rent numbers in your underwriting, you should be quite safe.

    Given your current rent, you should be able to make this work. Maybe a duplex with a big unit for your family and a garden unit to rent out to help the paydown? Lots with this setup in BedStuy. Clinton hill is pretty priced in at this point so could be tougher but such a great neighborhood. Bushwick doesn’t have the same amount of/quality of brownstones, so I’m biased against it, but you can find newer buildings with fewer headaches.
    Shoot me a message if you want to chat about it. 

    2Reply
  • Alexander Szikla
    Real Estate Agent · New York City · Member since 2020 · 818 posts · 639 votes
    5y

    You can absolutely find a 3 or 4 family in those areas that makes sense cash flow wise for ~$1.5 million. 

    You just need to be patient and work with a good agent!

    1Reply
  • Abel CurielBusiness Member
    Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
    5y

    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

    REbuild Team - eXp Realty5234 Reviews
    WebsiteView Page
    3Reply
  • Michael Carbonare
    Investor · Fort Lauderdale, FL · Member since 2013 · 917 posts · 607 votes
    5y

    As a former NYer I say this with full confidence:  get the hell out of NY.  The state, (ugh, Cuomo), and city, (2X ugh, DiBlasio), are mismanaged disasters sinking further and further into lawlessness, chaos, and tax hell.  It's also a very tenant friendly state and any landlord is viewed with suspicion when there is any tenant/landlord dispute.

    1Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    5y

    @Gianluca Rossi welcome to BP and congrats on your first post!

    0Reply
  • Brandon DeVega
    Real Estate Agent · New York, NY · Member since 2021 · 50 posts · 22 votes
    5y

    Contact me, we should definitely talk. @Gianluca Rossi

    0Reply
  • Gianluca Rossi
    OP
    Member since 2021 · 9 posts · 7 votes
    5y
    Originally posted by @Adam Lippa:

    Welcome Gianluca!

    I am not familiar with the area but as a general rule I am always cautious about assuming I will be renting out properties for more than the average rate (or my expenses will be less than average). I always try to be conservative and think about the realistic worst case. It sounds like you have thought about a few options depending on which way the housing market goes, just spend some time making sure you double check the math and the reasoning if you think you'll be doing better than the guy next to you.  

    Good luck!

    That's good advice Adam! 

    0Reply
  • Gianluca Rossi
    OP
    Member since 2021 · 9 posts · 7 votes
    5y
    Originally posted by @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

    That's an excellent point Abel about gaining acquisition, project management, and property management.

    Regarding the property type, I'm focusing exactly on what you're suggesting ― multi-family with an accessory unit. I've started to research deals that meet my expectations that were closed in the last 180 days in those areas to get a better idea of what's available in the market. 

    I'm also going to start looking at properties in the $1.5-1.75M range, as it might lower the mortgage and initial downpayment without sacrificing too much in living quality. I need to see some in person to get a better idea. 

    2Reply
  • Llewelyn A.
    Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes
    5y

    @Gianluca Rossi

    I have been buying in Clinton Hill, Bed-Stuy, Windsor Terrace and Ditmas Park for the last 23 years. Only sold one of 10 properties, and that was to a Partner.

    Needless to say, my Partners and I have made multi-millions.

    We did exactly what you did, house hacked before House Hacking was coined. It works.

    There was one guy I met who had a Cobble Hill 3 Family back in the 90s. He sold it for about $2 Million around the year 2000.

    He then took that money and bought a Single Family Brownstone on 1st Street just a few houses in from Prospect Park. He listed that for $6 Million a short while ago.

    A lot of people on here won't believe that a $6 Million property will probably be worth $10 Million in 10 or 15 years just like they won't believe a $2 Million Property will be worth $6 million in 20 years.

    But all you need is one property and you can become a multi-millionaire.

    Also, I'm not giving advice. I'm just giving my personal experience and observation.

    0Reply
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