Brooklyn newbie interested in multi-family purchases

[Carmen Sognonvi]

Hey BP community!

My husband and I have been listening to the podcast for a month or so now, and finally decided to get active on the site.

We live in Brooklyn, NY, have two young kids, and own a successful small business. In a few more years, we're looking to purchase our first home, and after that we'd be interested in getting into some real estate investing. Or we may make our first home a 2-family unit so we can get our feet wet as landlords - we're not sure yet.

We've drunk the Dave Ramsay kool-aid so we'd like to do this as un-leveraged as possible - either paying all cash, or using a mortgage but paying it off as quickly as possible before we purchase the next property.

We want to spend the next couple years learning as much as we can about real estate, so that we can make some good decisions. Right now we're evaluating these possible scenarios:

1) Buy a renovated, move-in ready brownstone and live in the owner's duplex while renting out a garden 2BR apartment. Work on paying off the mortgage in full before moving on to buying pure investment property. Pros: less construction work, rental income to help cover the mortgage. Cons: have to deal with a tenant, would pay a premium for a renovated property, wouldn't have the whole home to ourselves.

2) Buy a unrenovated brownstone and do the work to make it into our "dream home" and just live in the whole thing. Work on paying off the mortgage in full before moving on to buying pure investment property. Pros: we'd spend less on the property as it would be unrenovated, we could live in the whole thing. Cons: we'd need to do construction and have no experience in this area - makes me nervous, no rental income.

For our primary residence, we'd be interested in buying in Bed Stuy, where we currently live. For future investment properties, I was thinking of 2-family homes in East New York or Canarsie.

Would love to know what you all think - especially fellow New Yorkers!

Thanks,

Carmen

[Darren Sager]

Welcome to BP @Carmen Sognonvi  ! Chances are if you start reading all the boards here most will advise you to spit out the Dave Ramsey Cool-Aid and get a strong handle on how to invest so that you can minimize your risk and still reap the benefits. I'm a big proponent of paying off a mortgage early however without the use of a mortgage and other people's money I would never be in the situation I'm in today.

The best opportunities you'll find will be ones that may need some work however thanks to HGTV many now understand the importance of making a place for sale ready for purchase. It doesn't necessarily mean the work is done right however with low inventory we just don't see the distressed homes as much as we used to here in the NYC area.   I started off purchasing a duplex and fixing up the tenant's side first to increase my rent roll.  Then I worked on my side.  This strategy worked very well for me and a number of others including @Brandon Turner who even wrote an article here on BP called How to "Hack" your Housing and Get Paid to Live for Free . It's probably an article you should read.

NYC is a difficult market to navigate within.  The downsides are your cap rates and cash on cash return aren't as high as other places.  What more than makes up for it is the constant supply of potential tenants reducing your vacancy rates.   Great to have you on board and hopefully you'll become an active member of the community here!