I want to buy Multi family in NYC/Yonkers
New York City, NY · Member since 2016 · 20 posts · 7 votes
I am a VERY successful Brooklyn Investor, holding onto approximately 7 multi-family Properties valued around $15 to $20 Million, Revenues around $700k and cashflowing extremely well when compared to the other properties that people here are talking about.
If you go through my postings, and you might need to be my Colleague to do that, you will see that there is a lot more to RE than just calculating whether a property Cashflows or a Cash-on-Cash Return.
I have taught Real Estate between 2005 to 2013. There were many students that did it the "Cashflow" way and indeed, ALL of them worked harder than I every did with my properties.
Part of the problem is that the non-Quality properties lack the ability to do proper due diligence.
You cannot expect C and D neighborhoods to have high Credit Score renters. In Fact, the Investors that I have known to invest in these neighborhoods generally throw out the Credit Scores. It's just meaningless to look at them other than, hey.... it's so low I better do a Criminal Background check because this person's credit score indicates he's been absent from life for a while (possibly incarcerated). I don't mean to Generalize, but there is a big difference when you can accept Prospective Tenants who have 800 FICO Scores, $100k's in the Bank than someone who generally has a terrible Credit Score and no money. If you are expecting that the work will be the same, I don't know NOT ONE Investor who has seen my properties basically run itself as compared to those non-Quality ones.
Another problem is the Math behind the Property Manager. A PM gets 10% of the rent roll. If your rent roll is say, $500 per month per apt, the PM gets paid $50 per apt per month....... THINK about that. What would you do for $50 per month?! Honestly..... there are a lot of People who would ignore working if that's what they get paid. If you are not doing things in bulk, eventually, your PM will need to be replaced. I know PLENTY of cashflow investors in these low income properties that CONSTANTLY have to replace their PM. Of course others can chime in because that just may be only my opinion and others that I have had the opportunity to question. Some of the stories from my CF Investor friends are horrible. PMs will rent an apt, not tell the Investor, collect the cash for themselves... etc. One Investor friend of mine had his plumbing and appliances stolen from the PM. I'm not saying this happens all the time.... but when someone gets paid so little... I can see why they would want to take other kinds of opportunities.
When I taught classes, this came up quite a bit. To give people an understanding, I had to ask them, "What's the difference between an Investment and a Business?" Don't read further until you at least try to answer it yourself for a few minutes. You'll find it difficult.
ANYWAY, the Answer is that a Business requires the active participation of the owners, paying expenses, making a product, finding tenants, etc. An Investment is very passive. All you do is buy something like a Stock. You don't participate in the Day to Day activities.
Investment Properties are sort of a hybrid. There are elements of Investments even when you are managing the property yourself. For instance, the Value Appreciation is much like an Investment.
The way I like to put it is if you are looking for an Investment, then you want to buy a property where the managing of it is very easy. These ARE generally the higher quality properties in good Neighborhoods.
If you are looking to make a lot of initial Cashflow (notice I said INITIAL because a lot of times high Quality Properties will have high cashflows in the Future, but not necessarily now), then you may very well be buying a full time Job. In some cases, you may be buying a heart attack.
Anyway, these are strictly my opinion, but I have a LOT of experience... 2 Decades in Brooklyn, taught RE from 2005 to 2013.... some of my students were so successful that one made $2 Million in appreciation over a 5 year period.
The Readers of this Post should take everything with a grain of salt. Look at the many alternatives and understand why there is a willingness to buy High Quality Properties in High Quality Cities and Neighborhoods. Don't dismiss it because it doesn't cashflow as well as the low income neighborhood properties.
And if you really think about it... had you invested in NYC from the Financial Crisis until today.... you would easily have been on your way to be a $millionaire.
Investor Llew
There are many places in the NYC metropolitan area that are very good for buy and hold investing. However @Justin Burgos it really depends upon your budget and experience. You'll find many here on BP that are successful at it.
agree. New York is not a place for new investors, only flippers. I tried for to get into the market last year. None of the properties make cense by numbers. Brokers were giving us very high rates for commercial mortgage, agents were crooks. I had a cense that everyone is trying to take advantage, and eventually gave up. Out of state difficult first but more approachable.
@Justin Burgos Ha! I don't touch the sub $30K market. In fact I don't touch much below $200K. I prefer properties in solid performing towns that have a great history of performing. I try to find homes there that are in need of mammoth repair, close to trains if possible. Although we (a partner and myself) just started a gut reno on a rental in Maplewood, near Seton Hall, to turn into a student rental (since it's a 7 minute walk to campus). That was under the $200K mark.
If you go into the low priced markets, although the barrier to entry is low, the price in my opinion is high. That is your time and energy needed to manage and take care of those who're living there. The higher priced rentals come, in my opinion, with less drama, and more of those who are self sufficient in most matters in life. My quality of life is most important to me. So hence why I don't touch the low priced ones.
Sorry Darren. I meant to say that you operate out of north jersey. Close to where I live in upper Manhattan. Not that you work with sub30. I definitely will take your points in to consideration. Quality of life is one of the reasons I'm pursuing REI to begin with. Lol
It seems like there isn't an abundance of investors on BP operating in the ny metro area. And no podcast guests from NYC either. It would be awesome to find someone with experience investing within 30 mins- 1hr from upper Manhattan. Do you guys know anyone? I'd be willing to work to compensate for their time/perspective. I'm also happy to treat them to lunch!
Hi @Justin Burgos, I specialize in multi-family investing in Westchester County, in particular in Yonkers and Mt. Vernon; both great cash-flow markets which benefit greatly from their proximity to NYC. We have over 100 doors in Yonkers alone, many which were acquired via distressed situations. We have done very well over the years and we are still actively investing in the area. I still recommend it to any new investors looking for deep value and the opportunity to benefit from location and population shifts.
There's a lot of interest in Yonkers in particular and that has created a situation where inventory is tight and the market is experiencing some nice appreciation. We do our own marketing to source properties directly from sellers. It takes some work but there's good opportunities out there. Just last week we closed on a cash flowing duplex in Mt. Vernon, we paid $150k, the property needs less than $2k worth of work. That's something we'll most likely flip in the coming weeks.
I agree with @Darren Sager in regards to the work required to stabilize and manage the tenants that come with lower priced properties. It takes a lot of time and work to do it right. You really have to clearly define why it is that you want to get into this business to begin with, the quality of life you want to lead, and that will tell you what kind of properties to focus on.
Best,
Ruben
Thanks so much Ruben!
That's encouraging to hear. I am trying to figure out how to get my foot in the door with low money down. I'm a 26 year old newlywed, just trying to use my entrepreneurial spirit and work ethic to create a portfolio.
Gratefully,
Justin
@Justin Burgos Sub30k market is the same amount of work as any other niche, you just need to knwo what to do. Some people are so far removed from these neighborhoods its hard to adapt, but most of the people in my sub30k mastermind community come from these neighborhoods like I did, are very comfortable in these neighborhoods, and are making new york city work just fine for them. Also, they all mostly invest out of state - not hard at all once you have a good, solid system in place to ensure success. You may want to check that out, as these questions and others have been answered there. Good luck!
@Krystof Pilisiewicz don't be worried by those who can't make it work here. It's okay. The NYC area has very high barriers to entry. High barriers to entry are great when it comes to investing. It keeps people out of competing. There may be other places around the county that may perform better when it comes to a cap rate, or a cash on cash return. I'm okay with that. They need to provide that because as you stated the values of property here can go up tens of thousands in a year which creates true wealth. If where you're investing doesn't have great jobs around technology companies you better get a good return because you're not going to be making a lot in appreciation. My opinion of course.
If I were starting off here and wanted to make it here, I think I'd partner up with others. @Brandon Turner talks about it in his book. Share the risk. Learn the local market.
For someone's first real estate investing purchase, it should be a crawl before you walk, not half a million dollar and 100k down payment to find out you calculated things very improperly (the renovation, the total acquisition costs, rents, tenant laws) due to first timers inexperience. That's something to think about for new investors when deciding on their strategy.
Once they learn the ropes, the uncompetitive (although, aren't they competing by how much money they have on hand vs those who dont?) market is something that may be more appropriate for their skill level and pocket book.
I am a VERY successful Brooklyn Investor, holding onto approximately 7 multi-family Properties valued around $15 to $20 Million, Revenues around $700k and cashflowing extremely well when compared to the other properties that people here are talking about.
If you go through my postings, and you might need to be my Colleague to do that, you will see that there is a lot more to RE than just calculating whether a property Cashflows or a Cash-on-Cash Return.
I have taught Real Estate between 2005 to 2013. There were many students that did it the "Cashflow" way and indeed, ALL of them worked harder than I every did with my properties.
Part of the problem is that the non-Quality properties lack the ability to do proper due diligence.
You cannot expect C and D neighborhoods to have high Credit Score renters. In Fact, the Investors that I have known to invest in these neighborhoods generally throw out the Credit Scores. It's just meaningless to look at them other than, hey.... it's so low I better do a Criminal Background check because this person's credit score indicates he's been absent from life for a while (possibly incarcerated). I don't mean to Generalize, but there is a big difference when you can accept Prospective Tenants who have 800 FICO Scores, $100k's in the Bank than someone who generally has a terrible Credit Score and no money. If you are expecting that the work will be the same, I don't know NOT ONE Investor who has seen my properties basically run itself as compared to those non-Quality ones.
Another problem is the Math behind the Property Manager. A PM gets 10% of the rent roll. If your rent roll is say, $500 per month per apt, the PM gets paid $50 per apt per month....... THINK about that. What would you do for $50 per month?! Honestly..... there are a lot of People who would ignore working if that's what they get paid. If you are not doing things in bulk, eventually, your PM will need to be replaced. I know PLENTY of cashflow investors in these low income properties that CONSTANTLY have to replace their PM. Of course others can chime in because that just may be only my opinion and others that I have had the opportunity to question. Some of the stories from my CF Investor friends are horrible. PMs will rent an apt, not tell the Investor, collect the cash for themselves... etc. One Investor friend of mine had his plumbing and appliances stolen from the PM. I'm not saying this happens all the time.... but when someone gets paid so little... I can see why they would want to take other kinds of opportunities.
When I taught classes, this came up quite a bit. To give people an understanding, I had to ask them, "What's the difference between an Investment and a Business?" Don't read further until you at least try to answer it yourself for a few minutes. You'll find it difficult.
ANYWAY, the Answer is that a Business requires the active participation of the owners, paying expenses, making a product, finding tenants, etc. An Investment is very passive. All you do is buy something like a Stock. You don't participate in the Day to Day activities.
Investment Properties are sort of a hybrid. There are elements of Investments even when you are managing the property yourself. For instance, the Value Appreciation is much like an Investment.
The way I like to put it is if you are looking for an Investment, then you want to buy a property where the managing of it is very easy. These ARE generally the higher quality properties in good Neighborhoods.
If you are looking to make a lot of initial Cashflow (notice I said INITIAL because a lot of times high Quality Properties will have high cashflows in the Future, but not necessarily now), then you may very well be buying a full time Job. In some cases, you may be buying a heart attack.
Anyway, these are strictly my opinion, but I have a LOT of experience... 2 Decades in Brooklyn, taught RE from 2005 to 2013.... some of my students were so successful that one made $2 Million in appreciation over a 5 year period.
The Readers of this Post should take everything with a grain of salt. Look at the many alternatives and understand why there is a willingness to buy High Quality Properties in High Quality Cities and Neighborhoods. Don't dismiss it because it doesn't cashflow as well as the low income neighborhood properties.
And if you really think about it... had you invested in NYC from the Financial Crisis until today.... you would easily have been on your way to be a $millionaire.
Investor Llew
@Llewelyn A. Hi there, Glad you had the opportunity to take advantage of the market at that time. As I speak to new investors every day, they don't/didnt have the opportunity. OF COURSE everyone wants an easy, high cash flowing, high valued property - where the tenants have 800 credit scores, and where the tenants are never late and treat your property like gold.
BUT reality is, for many new investors, they dont have the capital to put 20% down on a half a million dollar home (especially for their first property when they are learning the game), nor do they want to if there isnt significant cashflow. I know alot of people will say with a straight face to wait 20-30 years for when something is paid off, but that's not what everyone is going for or want. That doesn't mean they dont deserve to be in the game waiting for them to have as money as you do.
So, $500 rents? I mean, not in our sub30k markets. And 800 credit score with a 100k in the bank? That's not even guaranteed in A neighborhoods, and even if it is, MOST NEW INVESTORS SHOULDNT/ CANT invest those high amounts to get that new york brooklyn property. Thats what people with good, but not necessarily helpful, advice don't get.
And as i mentioned, the people really doing well in the sub30k property market grew up in lower income/working class neighborhoods like myself, and do quite well with the selection, tenants, etc.
Just like the sub30k market may not be for everyone, and high quality, high barrier to entry, and high costs rentals aren't necessarily where a new investor should attempt to do on their first investment without someone serious mentorship or coaching, and I think its a bit irresponsible to insist that's the only way to go if you are someone who is putting themselves forward as a thought leader (being the very successful investor you are that you greeted your comments with puts you there) without any of the underlying support is asking for someone to be severely burnt and disillusioned. I speak to people everyday who were burnt by that advice everyday. I've others EVERY DAY and get them to buy their first cash flowing rentals (I can link to it if you want to read their success stories using me and my strategies in this area).
But, I would ask you to speak to people like me in the sub30k community, who STILL have family and cousins who live in these areas you overlook, who are doing great there. Probably because they do come from these places, and the majority of investors up to this point, may have never set foot there and don't relate to the culture.
So, if you're saying ALL strategies can be learned and considered to see if its right for them and their pocket book, then great - we agree. If you're insisting this can't work and you know best, I hope everyone who takes your word as gospel isn't disappointed that they didnt give it a second look.
- I'm not telling you to be a sub30k investor or no, but understand - we have answers, solutions, and investors who have figured out the solutions to these questions, but you can see the response they get by posting on here, vs in our mastermind community, are light years away from each other. Its a completely different discussion.
Ah yes, and many of our NYC investors are doing just fine investing out of state, that's no problem at all, since they dont have 100k as a down payment to purchase a brooklyn brownstone. Anyways, good luck, just wanted you to know there is another way!
That gets a little lost on BP sometimes.
I fully understand that many Investors just don't want to Partner. But the Math behind Partnerships tell you that you absolutely SHOULD.
Many of my former students, about 95% refused to Partner because they had no one in their lives that they can Trust. To me, that's not a the real issue. The issue is WHY don't you have trustworthy people in your life? After all, part of investing is NETWORKING and we all know there is PLENTY of Networking opportunities out there. So why are you not meeting the right persons to for Partnerships to buy in NYC? When you open up your Investment Opportunities, you have more choices. Why limit yourself to a single kind of opportunity? Why not explore the RE world fully and then make your decision?
Breaking down the Student numbers, 500 students break down to 475 who didn't partner and about 25 who did. That's pretty much what happened. Those that partnered with me or themselves, did so well it's mind boggling.
The other 475 even refused to go to the reunions I have normally so everyone can talk about their successes. Those 25 Students are very wealthy today.
Those who have read my past postings will know that when you look at the MATH of cashflowing a Property, IT'S NOT THE PROPERTY THAT CASHFLOWS, IT'S THE INVESTOR.
An example would be a property that cashflows with when Investor A pays all Cash. Let's say it cashflows $500 per month. Do we call that a Cashflowing Property? YES?!
OK.. so if Investor B can buy the same Property with full 100% financing, but he pays $600 in Mortgage payments each month, making it a NEGATIVE Cashflowing property, do we still say the Property is somehow NOW a Negative cashflowing Property?!
Which is it... is it a positive or negative cashflowing Property?
Indeed... it's not the Property that Cashflows...... IT'S THE INVESTOR that makes it cashflow or not.
Whether or not you decide to make a property Cashflow is UNIQUE to your own strategy. If you only investigate ONE aspect of making money from RE, you are severely limited in your opportunities.
There are AT LEAST 4 Ways to make money in REI. Cashflow is just one. Read my posts for the others, which I have done incredibly well with.
Now, in regards to Partnering.... the MATH tells you everything about why you need to Partner.
Let's say you can buy an Investment for $100k. You also know it will be worth $200k in 5 years. So that's a 100% ROI if you buy at $100k and sell at $200k.
So you can't afford the $100k.... which is the reason you are stating why so many people should not do it "my way."
However, since you can't afford $100k but you can afford $50k, you then recruit a Partner who has $50k.
GREAT... BUT.... since $100k returns 100% in 5 years, if you buy in with a Partner, you only get HALF the Return!
Wait.... let's check the Math. If you and your Partner put in $50k each or $100k TOTAL and sell the Property for $200k and split that for $100k each, you both invested $50k and returned $100k! Wait... that's STILL 100% Return in 5 years!
This demonstrates the reason to Partner. You never analyze the ROI of the Partner. You only Analyze the ROI of the complete DEAL. Then EVERY PARTNER gets the same ROI!!! AMAZING and this is the kind of math everyone needs to learn and understand.
So, first you figure out what you have.... say, $20k. Then you look at EVERY deal, whether it's in NYC or the boondocks. IF NYC RETURNS ARE MUCH HIGHER.... and in fact, THEY ARE.... then you Partner with other so that you ALL can get that High Return.
BTW, I don't overlook sub30k communities. I analyze EVERY community. What I see time and time again is that those with SUB30k outlook are the ones that overlook the above30k communities. That's because the really don't know how to Analyze these higher priced investments.
By limiting yourself to only you.... you exclude yourself from other deals, be it NYC Investment Properties or large Apartment Complexes.
One of your BEST SKILLS that you have as an Investor is to learn how to attract the Partners whom can mutually help you succeed in your Investments.
The Readers of this post should know that you should be looking at yourself as a Potential Partner. You will need to ask yourself "What do I bring to the Table" in order to attract good, experienced and successful Partners. Good Partners will absolutely supercharge your Investment Career.
Investor Llew
Well, that's the million dollar statement, isnt it? If it was that easy, it would be happening everything. I live in the south, and the majority of people in this area will barely allow me in their living room (not the same as up north), but let alone to get to the segment of the population that are experienced, AND willing to bring me on - that's a major problem, and its a disservice to overlook that this can be downright impossible if we just go with the regular go to church, REIA meetings. Not everyone has access to that social capital.
Now, the investors I work with simply don't want to partner, and this strategy makes that possible. Not everyone wants to dilute their profits and invite other people's opinions and inputs in their legacy building, and this possibility makes it possible.
But, we seem to be talking at each other, not too each other. I never mentioned Partnerships - although like I mentioned, that's a whole can of worms depending on what part of the country you live in. Also, cash flow is one of many metrics, but yes, If someone pays 25k for a property and makes $500 a month, that's still better than paying 250,000 for $500 a month - some people don't get that. And some people dont want to "bet on appreciation," as that's speculating and they don't want to play the house - they want to know exactly what their return on investment is each month, not hope that there is a 100% roi in a year - that only happens to very few people, and isnt the norm.
But yes, partnerships on larger items CAN be a method, but not everyone prefers that if that means investing in NYC. I am working with a client in NYC who is partnering now - its a complete mess if you dont have someone experienced working with them. You like to say,"Whats wrong with him that he can't find an experienced, well placed investor" Whats wrong with everyone??? Because those people are hard to come by, adn I know as hard as I work for others, they STILL aren't giving me and others a chance. That's cookie cutter advice that sounds good, but is the reason people have gone 10 years without investing, and I helped them get their first property in 8 weeks. Because instead of hoping things are perfect (and an experienced investor is finally going to let us in on the good deals), I help people get to work now.
I wish the people who used to be the authorities on this realize that this talk without real help to back it up isn't helpful. It's not just that simple.
I have a huge platform and know 1000s of investors - Im still not invited to any deals regardless, so sometimes its accessible to some, but myself and my working class routes, No, even I havent been invited to participate with an experienced investor in a sweet deal - And that's true of the majority of not having access to those people.
Even though I had been investing for 2 Decades, the reason why I started teaching in 2005 was so I can form Partnerships with people who had shown me that they were willing to learn Real Estate. It's funny, but most people are more interested in giving you their money and having it invested to make money for them.
I implemented exams in my Courses which you had to pass in order to move up to the next level. The first Exam is to calculate a Rate of Return (RoR) of an Investment giving the Purchase Price, Down Payment and Closing Costs. Then you are given the Sale Price and the year it was sold. You then had to calculate the Sales Proceeds based on a 6% Commission. You had to calculate the Mortgage Balance and the Seller's Closing Costs.
That was the FIRST exam. From a field of 100 students who all answered the same questionnaire, who said they were extremely motivated, proved that 50 of those 100 students were not motivated enough to get through that BASIC Financial RE Calculation.
There were lots of complaints from those that could not get past it as they paid for the beginner course (only $20 per week for 1 class per week). They strongly believed if they paid for the Course they should go on to the Intermediate level, despite not passing the very first Foundation Exam, the RoR calculation.
The group that passed, the other 50 students, went on to learn how to put together a Business Analysis Model. They built a Profit and Loss (P&L) statement and did various calculations including NOI, Cashflow, Mortgage Payments which was based on their own qualifications. They had to understand how things like Pre-Payments work, Buying Down Points, etc.
Again, I gave the exam and yet again, 50% of the students who claimed to be motivated failed to pass and to continue to move onward to their Advanced Class. Now 75% of the student base was weeded out.
The Last Course was the one that would determine if you could be invited to be one of my partners. You had to put together the Advanced Business Model which takes your P&L and projects it out to 10 years, make certain assumption on Appreciations using Historic Data, calculate the 10 year Mortgage Balance, 10 year NOI and Cashflows, and boil it down to an Internal Rate of Return (IRR).
You needed to learn about how Economics work, what are the various Economic Indicators, especially with regards to Real Estate ie. Existing Homes Sales Data, New Construction Data, Movement of Long Term and Short Term interest rates (what is interesting is learning things like the Yield Curve Inversion which is a signal for an upcoming Recession), etc. You had to know the Cycles and the approximate events that proceed a Neighborhood as it either declines or increases (such as how a Neighborhood gentrifies), etc.
In fact, this is basically the same calculations that's done with the BRRRR calculator. The difference is that you can tweak my Advanced Business Analysis so well, that it should be 90% accurate, given conservative pro-forma numbers.
This weeded out another 75% of the students.
If you had taken the entire course from beginning to Advanced, you would have probably paid around $500. But you would have been so educated, that it would have been very close to a CCIM.
Of the remaining students, approximately 20 of them, ALL but 1 became successful. The one that did not when back to the old ways of doing the Cash on Cash Return versus the 10 year pro-forma IRR calculation in the Advanced Business Model. He also bought the Investment property by himself without allowing me to Model it in class. I believed he knew I would have been very upset with him diverging away from the teachings he already had. But that's fine as long as he can make it successful.
Unfortunately, he didn't. He got taken for a ride by the Real Estate Agent that gave him bad Renovation Numbers. I would have easily caught that since I have a team of trusted Contractors who were also available to the Student, but he ignored that as well. While he was capable of buying the investment, which in itself was very fraudulent since it was inhabitable but he was able to get a Primary Mortgage without a Construction Loan, he couldn't come up with the money to finish the project and it went into foreclosure.
Aside from him, 100% of my advanced students have all become successful. They were not rich. They were so motivated that they were able to go all the way to my Advanced Business Analysis Models.
The program they went through evolved them into natural partners. They learned for a long period of time, approximately 9 months. They studied together and analyzed deals together. Several Partnered with me, several grouped together one their own.
I think what really is the problem is these short, 3 Day Seminars. It's made to give you some education, but the problem is that most people just cannot absorb the information in such a short period of time. Then they are put into a situation where they must sink or swim. Most are not experienced enough to swim, unfortunately.
BUT, put people together in such a long term program, they get to know each other, learn about each other's personalities, socialize and speak the correct Real Estate / Business Jargon, and hear about each other's success.
You can say that the program failed because 95% of the student did not go past to Advanced and only 5% became successful. But what ultimately happened was that those students that did go to Advanced, probably made upwards of $5 Million in profits total in about 6 years together.
They weren't rich in the beginning, but they certainly were rich at the end.
I am just saying that maybe there is a better way to teach people Real Estate Investing than these short 3 Day Seminars or courses where Students get passed to higher levels where there is no consequences and the only reason you move up is if you have the money to pay for it.
One of my Colleagues pointed out that 5% of the populations are wealthy. So having a Course where only 5% of student passed the Advanced and become Wealthy is pretty coincidental.
I have to say in order to really know if you are motivated, you would really need to go through a rather intense learning. That will prove to yourself if you really are as motivated as you think you are.
Then, once you prove it to yourself and your Colleagues, Partnering is just Natural.
Investor Llew
"And if you really think about it... had you invested in NYC from the Financial Crisis until today.... you would easily have been on your way to be a $millionaire."
If you had been leveraged long the S&P500 from the Financial Crisis you would be even reacher. That does not prove much. Back-trading is easy.