100k in Long Island NY what does it really get me?

Question

Hey Bigger Pockets! I’m weighing a bunch of different options right now and need feedback from the community :)

I purchased a home about a year ago with a legal accessory apartment in Long Island NY. Purchased with 10 percent down and PMI. I live downstairs and have a tenant upstairs. Have been saving up to make another real estate investment and have found that true multi families are hard to come by in the area. The traditional investment property mortgage requests 20% down, which I could make work but I'm trying to consider other options instead:

- I have considered an FHA loan but would need to move into whatever house I purchase and the current house is really a single family home.

- I’ve also considered a home equity loan on my current house in order to have more cash to invest into a rental property but would only make my mortgage go up and may make it difficult to have cash flow if I want to build my portfolio.

I’d love to hear what you creative folks think. Am I missing better options?

Mark Jackolski · Answer

Hi Bill I’m planning on going to the meet up on the 13th. Would be great to meet you.

Bill Struss · Answer

Hi Mark,Funny thing I am in the same boat as you, bought a home with a legal accessory on Long island about a year ago. There is a Meetup in Nassau county meets once a month Real estate rocks setup by Suzanne Player if your interested.

Mark Jackolski · Answer

Thanks Suzanne. I’m currently looking for a legal 2 family home. I’m open to most of Long Island but have been focusing mainly on long beach, Rockaway,(id assume flood insurance would be needed. Haven’t looked to deeply yet into what this would mean for an investment) patchogue, Northport, and Babylon. I’m in the early stages of looking at my second property. Have had a cursory conversation with a mortgage broker but was told that 20 percent down would be the only way to get a loan.I’m definitely open to other options if the numbers make sense. What has your experience been with single family homes? I’d imagine people wouldn’t interested in renting an entire home rather than buying themselves.

Suzanne Player · Answer

It's tough to give much of an opinion without actual numbers (the value of the house you have now, the loan balance & rate, your current piti (principal, interest, taxes, & insurance + mortgage insurance where applicable), rent from upstairs tenant (you're declaring on your tax return so you can use it for your next loan application, right?). Could you give an example of what you'd like to buy for your next property, including the area (you want to check for things like flood insurance specifically)? Did you get qualified by a mortgage originator? A 2 unit non-owner occupied might have a lower LTV. A cash out refi from your primary might be a better option than using a heloc on it, depending on how much you would borrow & how long you need it.Are you set on a multi-family? It could be easier to find a single family at the same price that rents for the same amount, but the rules for an FHA loan, FNMA, or whatever you use might make a single family easier while still accomplishing your goals. Also, Long Island has a lot of single family homes - and when you eventually sell to trade up to another property, you might sell it more easily.

Mark Jackolski · Answer

Thanks! Are you referring to a Freddie Mac loan?

Matthew Crivelli · Answer

You could find a property that needs rehab and use private money to finance the deal. Start with some flips to give you more buying power in the future! With a rehab loan you may be able to get away with 15% down and be given money to fix the property up. Once you have more cash in your pocket the doors will open up and you can start keeping the properties as long term holds.

David Windsor · Answer

The cheapest option is to borrow money via HELOC on your existing property. Yes, it will reduce your current rental income but, if you plan to borrow money for another acquisition, any debt will reduce your income. At least HELOC is cheaper than private money or hard money. Borrow, buy property, stabilize it, refinance and pay down your debt or buy another property.

Ashley Czarnecki · Answer

@Mark Jackolski I would also be mindful of local laws in the areas you're looking to invest. For example, the Town of Brookhaven only allows one accessory apartment as long as the property is owner occupied. If you don't plan on living in the property, Patchogue may not be the best area for a multi family investment property.

Alexander Szikla · Answer

Why not house hack via FHA in NYC right now. It is more desirable and you can do a larger deal with the same amount of equity. Not to mention higher appreciation and tax benefits on a smaller equity check. If you can get a 4 unit and a basement, that would be ideal and create major cash flow and equity creation, plus you can not worry about a property manager and boost your yield. Cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx. Nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise.

Suzanne Player · Answer

@Mark Jackolski There aren't that many SFR's for rent on Long Island, but people rent them. If you start to do regular searches for SFR's to rent in Long Beach, Northport, and Babylon, you'll get a sense of what's out there (if you're not already doing this).Long Beach is a big singles area, perhaps renting a house with roommates is better or cheaper than renting in a building. You might find single people who want a SFR. Rentometer.com is useful for checking rents by zip code & even neighborhood. They don't have every neighborhood though. You can also contact real estate agents who list a lot of rentals in those towns & ask their opinion. This is also a good way to find an agent if you might want to list the place after buying.