Newbie from Troy, NY.. Hello! What would you do next?

Question

Hi! My name is Ed Littell, I'm 27 years old and currently live in Troy, NY. I have absolutely no experience in either investing or real estate. I'm interested in REI not just for the potential of financial independence, but also because I am truly fascinated in Real Estate, particularly in the idea of transforming a house from sub-par to a desirable place to live.

As of this moment I am a package driver for UPS, and I'm not overly thrilled with my job. I have several years experience in sales in telecommunications and life insurance. Before that I did commercial electrical and I have a range of experience in basic home construction.

I have read the "Ultimate Beginner's Guide to REI," which was a great read, and am currently reading "Real Estate Investing for Dummies." I've also caroused through various forum threads and have found a lot of great information. As far as my financial situation, I have only small amount saved and I unfortunately did a number to my credit in my formative years (though I am working with a financial advisor on that now).

Really I'm not sure where I should go next, I know I need to continue my education before I can really get going but I also know that at some point I haver to begin to take action. I am considering maybe taking some real estate courses? One thing for sure I would like to learn to how estimate repairs. There's also a craigslist ad going around about joining an REI team, of course they're boasting 10k a mo. potential which concerns me as possibly being a scam, but if I could learn a thing or two from it and possibly network in the process maybe it would be worth looking at?

Anyway I don't want to ramble or take up anymore of your time and thank you for reading thus far! Any tips, suggestions, links for a local REIC or any other help would be greatly, greatly appreciated. I'm eager and ambitious to take the next step and make this my life.

~Ed Littell

Ryan Vienneau · Answer

Troy is one of those cities (like Schenectady...) where you can get burned not knowing each and every block in the city.  One street may get high rents and be highly sought after near Washington park or downtown, but the very next street is a total war zone.  Or, more commonly, one end of the block is great and the other end is a war zone.

Be careful looking at comps, addresses can be misleading unless you're intimately familiar.  4th st is a good example, there are some great bars and restaurants near the intersection of Congress/Ferry and 4th, but half a block south starts to get sketchy, and even sketchier the further you go south.  Oh, and half of Troy is in a flood plain, so there's that too.  Aaand ridiculous taxes, almost forgot.

Josh Robbins · Answer

Hey @Dominick Fiordimalva, i've been looking in Troy for the past 6 months now and actually got a place under contract on 4th street but slightly further north (it fell through due to structural problems not worth fixing).  The area you're looking at is priced at $45k for a reason.  It's a tough area and can have some difficult tenants.  I mention the deal i had under contract because after it fell through, the owners had to start the eviction process on tenants they signed just 4 months earlier.  that's not to say there's not opportunity there but you should expect challenges and factor accordingly.

A couple thoughts on your numbers... your taxes are low, they're closer to $5k, In Troy you can get the Tax Roll from the city website to see what the taxes are in 2016 and you can also look up the school tax.  Also i don't think $5k is a very conservative number on M&R, even if you're including CapEx, which i assume you are.  you're probably going to have more repairs to do with lower quality tenants and older homes, potential eviction costs and CapEx will cost the same whether it's a $45k duplex or a $150k duplex, beware of using percentages.  i would use at least $6k for conservative numbers and i would say it's closer to a 9.5% cap rate.

i also wouldn't trust a 3 bedroom and 2 bedroom getting the same rent until i saw the leases myself.

Account Closed · Answer

Hey Ed.

The most popular local education center for RE is Manfred. I took the online salesperson course because I could work on it on my own time. I will say I wish I had gotten the book to go with it since enjoy reading an actual book for things like this. The course could also be updated as far as appearance - it's basically a slideshow with 20% video of recorded in class instruction. The training is really about knowing terminology and laws. Dry but essential.

I have taken the Property management course online through Ashworth. It's basically an intro to the field and does not allow me to be a PM in NY. IREM is a good resource for PM stuff.

There is really a lot out there and it's also good to put yourself in the other persons shoes - whether its a banker, lawyer, another investor, etc. and ask yourself, "Will this person take me seriously or am I just wasting time for the both of us?"

I don't have any investments at this point, so my strategy is to get my sales license and learn how to put deals together.

Account Closed · Answer

Hi Ed. I'm from Troy and there is a local REI group called Action Investors Network. I've never been to it, but it's been around a few years.

The other advice I would suggest is to see your approach to REI like anything else. What I mean by that is there is a lot of hype and fluff in the industry and really comes down to either having money to invest or knowledge to invest/offer. In short, get a formal education within the industry - RE sales agent, property management, mortgage broker, etc. or have a good chunk of money.

Also, check out the dos.ny.gov site for what you can and cannot do if you are not licensed in NY. Basically, if you 'negotiate a sale, exchange or rental of real property...must be licensed as a real estate broker.' If you're putting up bandit signs or mailing out marketing...to me, that's setting the stage for 'negotiation'. (unless someone is paying you to do those things and you're not receiving a fee for the sale of the property) I recently asked two lawyers if I needed to be licensed to wholesale properties - they basically said yes and pointed me to the dos.ny.gov website.

And understand what type of investments you want to do? Where do you see yourself in your business - your role? Do you want to be hands-on, managing/supervising, sales/communication,etc.

It's a lot to consider. Good luck!

Ayodeji Kuponiyi · Answer

@Ed Littell welcome to BP! Best/first thing to do is get educated. Read read read! Read books on investing in real estate, listen to the podcasts, attend webinars and stay active on the forums while connecting with other investors in your area and pick a niche. Best of luck.

Josh Robbins · Answer

@Dominick Fiordimalva I am still very much looking in Troy. Taxes in NY can make it difficult but I like what's going on in the city. I'm focused much more on the downtown/RPI areas as I think you get a better quality tenant or you can get student rentals which can provide a better return with the increased rents you get with students.

Dominick Fiordimalva · Answer

Awesome feedback, thanks for the insight, I'll adjust accordingly, I thought my estimates were too good to be true.

Based on your reply, it sounds like you are still committed to Troy NY and continuing to look, is that right?

Please do keep us updated in this thread, I am interested to hear how it goes for you!

Dominick Fiordimalva · Answer

Hey Taylor Baruffi,

Can you share some more details of your experience in Troy?  As someone who has a mild interest in the area due to the returns I have calculated using Zillow listings, I am concerned about the state of the city, the types of tenants one could expect to attract for a ~$60k duplex, and the overall cost of ownership in Troy.  Can you help us break it down a little more?  especially for one of these "entry level" deals?

For example, I ran through a scenario with the property below and got some gaudy numbers, even with a conservative repair and maintenance budget.  Is this reasonable?

392 4th St, Troy NY 12180

potential monthly rent- $1,600

cost of acquisition- $45,000

anual maintenance / repair cost- 5,000

Taxes- $3,000

insurance- $1,200

water- $900

Cap rate = 18.86%

Taxable net income = $5,591/yr

assumed vaccancy rate = 8.3% (1 month/yr average)

Mark Nolan · Answer

@Ed Littell

Welcome to Bigger Pockets. BP is full of resources. You will find resources here from blogs to pod casts and forums. You can also send messages to members. This is one of my favorite features of Bigger Pockets especially for asking specific questions.

Taylor Baruffi · Answer

Hi Ed,

Great that you are starting so early. I started investing in Troy at 25 and it has been a great opportunity and success for me thus far.

I would say build capital and constantly look for deals. In the Troy area, you can find smaller multi-family homes (duplex/triplex) in the 50's and 60's. The down payment on these would be slightly over 10k and doable if you save some cash and look for creative financing for the rest (family, friends, other investors). You may be able to get better terms if you start with an owner-occupied duplex and have the other tenant pay the mortgage for you allowing you to grow your investment fund.

I closed on my last rental about a month ago and am already looking for the next opportunity. I am new to BP, but have listened to the podcasts for a while now. There are great podcasts on creative financing and 'Investing with Low and No Money Down' is a good read. PM me if you'd like to further discuss getting started investing in the Troy area and best of luck!

-Taylor

Newbie from Troy, NY.. Hello! What would you do next?

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