I want to buy Multi family in NYC/Yonkers

[Justin Burgos]

Is anyone on BP involved with buy and hold in the NYC area ? I have a few questions

[Llewelyn A.]

@Lisa Phillips

@Darren Sager

@Krystof Pilisiewicz

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