I Own a Multi-Family, Now What?

Question

I've been browsing through the forums trying to get answers to my many questions and have had some success but I wanted to post all of my questions here to get more specific answers.

So, I currently own a 4-family brownstone in Brooklyn, NY. I bought it in 2012. I have a great rent roll and profit from this property. I bought the house with NACA, first time home buyer program. I stay in one unit and rent out the other three. My ultimate goal is to gain full financial freedom through real estate. I want this to become my main or only source of income. I have about $20k saved and great credit but I don't want to use my savings or use my current property as collateral. What are my options to invest in real estate further? I live in Brooklyn, NY so the price of houses is astronomical. So here are my main questions:

1. What type of real estate investing can I do with little or no money (I.e. Flips, Vacation Rentals, Rentals, etc)?

2. Being that I live in New York, what areas near me would be affordable and within reach to be able to manage?

3. Hard money vs Private lending, which would be more suitable for my specific situation?

Thanks for all your help in advance!

Anthony Dooley · Answer

1. There is no such thing as investing with no money. I recommend getting more money.

2. You live in one of the most expensive markets in the country, so I would probably look at turn-key investments in other areas that you may be familiar with where you can actually make some money. NY is also renter friendly, not landlord friendly. You have less rights there than in other states.

3. I would network with friends that you know who also have money to invest. Syndicate the money to buy deals there.  Because of the high prices, taxes, carrying costs, you will need to leverage more money. Family and friends is where I would start.

Christopher Stanis · Answer

@Keisha F.

Binghamton NY is a massively cheap market, and we're just about 2 hrs from NYC. It's common to buy fixer upper homes in my market for 15-25k, and homes in good shape that are rent ready at 50-70k. Rents often fall in the 2% rule range. Ie- a house you buy for 50k will often rent for around 1000/month. It's like little Detroit.

And in reply to @Anthony Dooley- he's correct that every purchase requires money. I would clarify that there are dozens of ways to buy property without using YOUR OWN money. A few of my favorites have been using 0% interest credit cards, and asking the seller to do owner financing. (I've done commercial deals with 5% down and 0% down on a purchase. I've also had an owner finance 30% of my loan at 0% money.) The more motivated the seller is, the more creative you can get to buy properties where you don't have a traditional 25% downpayment.

Gary Kline · Answer

Binghamton is a unique market.... I am sure everyone says that about where they do business.  If you want some insight... I have been closing real estate for over 27 years in Binghamton.  Just contact me.  Regards.

Keisha F. · Answer

@OnYango Williams @Andrew Johnson Thank you!!

@Brandon McLean Yes, NACA was a trying process, but it paid off! I will definitely look into the areas you suggested. Thanks!

@Mark Gallagher Understood...my skin in the game would be the equity I have in my current property, I guess I'm just nervous to touch it since it's all I have right now.

Mark Gallagher · Answer

@Keisha F.

Hard money loans still cost money. You'll need to have some skin in the game (aka a down payment) in order to get a hard money loan. It's very hard to do with no money. Why don't you want to use some equity from your primary residence if it is available?

Anthony Dooley · Answer

Hard Money is money.  It also isn't free, or cheap. Do some research on real estate syndication. That is the only way most mortals can afford NY property.

Keisha F. · Answer

@Anthony Dooley

Thanks for your reply. In regards to "no such thing as investing with no money", I've read on this site in several forums that it's possible to invest in flips with little or no money down using hard money loans. I've also read that you can use hard money loans to purchase and then refi into a mortgage. Is this not true? Unfortunately, investing with friends and family is not an option for me which is why I'm looking for other means.

Andrew Johnson · Answer

I'm just going to chime in on one thing, I'd stay away from vacation rentals.  I've never found one that pencils out as well as a multi-family.  The property management costs are generally 20%-40% and you have increases costs around stuff like "new bed sheets" you'd never have to deal with in an SFR or MF.  Not to mention there's seasonality which means you make a lot of money 1/3 of the time and go in the whole 2/3's of the time.  And there's other quirks like beach homes often having higher insurance, general economy impacting the public's ability to afford vacations, etc.  The only way I've been able to get any pro-formas to cash-flow is with a very high down payment and that equivalent down payment would generate better returns in a MF.  Anyway, just my 2 cents on that issue.

I Own a Multi-Family, Now What?

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