Multi-Tenant rental advice for a newbie - NYC area

[Aaron Jenkins]

Multi-Tenant rental advice for a newbie

I am considering purchasing and renting out several small units as a passive (part-time) hobby.
This website gives great advice for starters but it seems very difficult to find reasonably priced properties in my area New York City/NJ.

Does it make sense to get property in another state and rely on a management company to maintain it?

Any suggestions on how to find anything like 4-units or less in NY?

Any ideas would be GREATLY appreciated.

Aaron

[Frank Chin]

My dad bought property in NYC in 1963, and I started investing in NYC in 1983. There are extreme peaks and valleys in prices, and currently it's at a peak. The last downtown started in 2006, was brief, lasted to 2008, and resumed its upward spiral.

I went through the cycle before that, prices peaked in 1986, bottomed out in 1993, till it peaked in 2006. Based on past experience, bottom to peak runs about 10-12 years.

Unfortunately, it's virtually impossible to cash flow in most areas today. It was also difficult in the 80's and I did look out of state, mainly in PA. However, back then, both me and m wife had high income W2 jobs, and concluded we could not do it part time as a hobby. So with my mom in law, we invested a total of $150K in three short years, and with a healthy cash down, we manage to cash flow from the start. The first 2 properties was within 20-30 minutes driving distance. With such an investment on the line, we cannot treat in as a hobby.

We were fortunate we ran out of money to invest by 1984, and when the market crashed in the late 80's, we held off. When the bottom came in 1992, 1993, we picked up foreclosures, including the home we live in. Picked up condos in foreclosure in MA, and had my sister manage it. So all of our properties are self managed.

One other thing I noticed is several investors I know lost big time picking up properties in the late 80's, as the crash came, and they each lost over $100K between negative cash flow and dropping property values. In the crash of 1986-1993, 3 families dropped from $350K to $275K. In the 2006-2008 period, 3 families dropped from $850K to $650K, but zoomed to $1.2 million this year.

So the key to survival is to put enough down to cash flow, and not treat it as a hobby, so you survive the downturns