New York Market for young and new investors

[Jalen Henningsen]

Hi guys! I am a very driven 23 year old trying to get into Multi-Family investing as fast as possible. I live in Iowa right now, but I am planning on moving to a better market that will uplift my potential to succeed. I am interested in the big city, and was wondering what it would take to get started in New York? I want to house hack and get to financial freedom as fast as possible so I am able to start my own real estate investing business. The reason I'm interested in New York is getting an oppurtunity to meet and learn from the powerful players, and it seems like a place where money can be made. If I'm wrong please let me know and suggest other markets that would be a better starting point. I will have $30K-40K with no debt by December 1st, 2018. Looking forward for the feedback! :)

[Llewelyn A.]

@Jalen Henningsen

@Donald Jeune

Thanks for the mention Donald.

Jalen, I've been house hacking the Brooklyn, NYC Market since 1997, even before BiggerPockets ever used the term "House Hack" or maybe they were NOT even around back then when I started investing!

First, you should have an open mind about your Strategy. You should not decide on Investing in a particular place until you educate yourself on what strategy works and then decide what you want.

There are a lot of people who will automatically rule out NYC, yet I, @Donald Jeune and a whole bunch of others have not only done well... but we killed it with Investment Properties here in NYC.

You can PM me to find out more information.

However, that's not to say other strategies which involves cash flow properties in different cities are not a good idea. You just need to know what are both Strategies and then make a decision.

One word of warning, however. I've personally known friends and family that failed to have purchased their home or investment here in NYC.

Eventually, they were priced out of the Market.

As an Example, in the year 2000, I bought a 2 family in a sketchy location near a part in Brooklyn called Prospect Park. The purchase price as $140k. It required a $21k down payment and $7k in closing for a total of $28k invested. Later I did $40k of renovations so that the total invested was $68k.

It will sell today, 17 years later, for over $1 Million. That would be somewhere around an $850k profit on $68k or a Total Return of 1,250%. Divide it by 17 years and you get a 73% ROI per year on just the Value Increase.

The Cash Flow was nothing in the year 2000. The rents were only $500 each apt. HOWEVER, today, those apts are now rented for $1,900 each or an increase of $1,400 per apt. I'm not even including that in the ROI.

When one of my relatives sold the property next door to mine in 2003 for $230k, she can now NEVER move back again because she can't afford to pay $1 Million for the same property she sold 15 years ago. That's the risk she took but she really didn't understand the dynamics of Big City Investing.

It's a different world in the big City. Therefore, a different Strategy.

There is also a reason why you don't normally hear about investing in Big Cities. The Math and Economics is generally a LOT more work to understand and is much more sophisticated. Books like What Every Real Estate Investor Needs to Know About Cash Flow are just never going to be popular because the math is very complicated although the Book breaks it down really well. Even then you may need someone to show you how it really works.

However, you can see that over the last decade, the amount of money those of us that had invested in Big Cities that didn't have a problem (such as Detroit), made an enormous amount of money.

So my advice is to learn both Strategies. But one kind of calculations will be able to help you understand both. That calculations is the Internal Rate of Return (IRR). The above book makes a great attempt at it.

Economics is another important factor. Knowing Economics would have saved the those who lost money in Detroit (of course not everyone lost money in Detroit, but more than the majority did). It should have been fairly easy to know that Detroit was in trouble economically as the Domestic Automobile Industry was losing Market Share to Foreign competition. That was very important to know in a city that depended 90% on Domestic Auto.

I don't discourage you to Invest here, in fact, I would encourage you. But don't think it will be a walk in the park. That hard work would eventually pay off!