Hello from The City That Never Sleeps - NYC

[Riley F.]

Hello everyone.

I'm 28 years old, working in the hedge fund industry in NYC and would like to start investing in real estate. I've always felt somewhat drawn to real estate ever since I was very young and am not ashamed to say that at age 7 or 8 I would watch the early morning infomercials with fascination as I saw how easy it was to build your net worth with NO MONEY DOWN and just hours a week.

I have a fairly robust background in investing given that my current job requires it, an undergraduate degree in a finance and the beginnings of a CFA charter, so at very least I have a cursory understanding of RE finance, especially from a numbers point of view. The problem is, the numbers aspect is just about where my knowledge ends -- if only RE investing were done on a spreadsheet and a telephone.

It's pretty obvious that BP offers a very extensive resource, so I've taken the time to read all of the "newbie" articles, listen to each of the podcasts, and generally consumer about 90% of the information that you have on this site geared toward starting out, marketing, etc. Now that the rubber has to start to meet the road, it's somewhat tough for me to figure out what direction to take or a real actionable first step, and I was hoping for a bit of direction from the folks on the forum who have more experience in RE investing in general, and investing in the NYC area more specifically.

My long-term goal is to own MF rental properties, ultimately building up a large enough portfolio to replace my current income (or at enough of it to pursue this full time). I'm lucky enough to have a pretty decent chunk of capital to start out with, so I feel like this might make starting out somewhat easier. My more short-term goal would be to acquire my first MF home and start to gain some experience / contacts. Also, I plan to join NYCREIA in short order, per recommendations on BP.

My questions are 3:

1) Where do you recommend that someone in NYC begins to look for MF homes with a focus on CF rather than appreciation (market appreciation not, equity created through rehab)? I have some hesitations about straying TOO far from home, particularly because my job demands a lot of travel, which makes lots of weekend travel to tend properties less than desirable.

2) Once I've chosen that market, is the first step simply to publish a website and begin to market?

3) Would you generally consider marketing absolutely necessary - I've heard opinions, and it seems general consensus is that you MUST market.

3b) Quick opinion poll : Yellow letters, post cards, or form letters?

I hope that the above was reasonably succinct, but if you need any clarification or have any questions, please let me know.

Thanks in advance.

[Amit M.]

why focus on cash flow and not on appreciation? If you're in NYC you have a wonderful opportunity to get into a gentrifying neighborhood. Imagine being in williamsburg several years ago. Cha-Ching!

Being your first place, you also have the opportunity to buy 3-4 units and owner occupy. One of the best ways to start IMO. Done right- promising upcoming hood, bldg that needs some TLC, and you take a smaller unit, you can live pretty cheaply. Then by adding renovations, increasing rents, and marke upside, you may be able to refi 1-2 years from now and buy another prop. Plus you lock in a low 30 year fixed rate. Keep this place as a long term rental, even if you move out. Equity-eventual cash flow-low fixed rate is a winning recipe, as long as you get into upward mobile hoods.

That's what I did in San Francisco for 19 years. Made all my money on incredible appreciation, whereby I was able to pull equity out and buy again. Cash flow for me was always something to be managed, not the main goal.

Look at all the rich people in NYC that buy flats all cash, just to park their money. Not the most efficient way to create wealth, but why do they do it? Because the right neighborhoods in NYC are golden as long term appreciation buy/holds. Same here in SF.

Don't know where you live, but I'd seriously look at parts of Brooklyn that have upside. Follow the hipsters. W-burg is done- yuppies moving in there now and it's expensive. Really study neighborhoods carefully. Read local blogs. Walk around and identify the hoods you think will pop in the next 2-3 years; then focus on finding the right 2-4 unit bldg. It's a lot of fun, and rewarding. That's all I do nowadays :)