Help on Brooklyn Three Family in Barclays Area

[Navin P.]

Hello BP community, 

I am looking for some thoughts from the community on a possible purchase of a 3 family in Brooklyn, NY in the Barclays Stadium area with great train access on a nice street.  I would live there and it would be an upgrade in lifestyle, but it's probably not where I would choose to live in the longer term.  It would cash flow very modestly when considering my imputed fair rent (so I get partially subsidized housing).  The area is clearly developing quickly but I see mixed signals on the rents that can be commanded by non-full service buildings.  The property appears to be well-priced for the area, but I have a great deal of trouble dealing mentally with the pricing in NYC in general and have my concerns about getting in so deeply at this time in the market. 

To add to this, I am in contract for another 3 family in Westchester at a discount.  I feel like I may have been lucky and I should not expect those too often.  There is also the question whether I should pace myself having just committed to my first investment purchase.  I have a full-time job, earn a good salary and have savings, but eventually want to strike out on my own in real estate and other activities.

I know this is limited info and maybe a little vague but I'd love to hear opinions and suggestions for considerations.  I can share additional details as needed.

Thank you. 

[Llewelyn A.]

Hi @Navin P.

Just curious, what's the percentage you are putting down on the 3 Family near Barclay's? Normally, you could not cash flow unless you put at least 20% down. Probably the norm is that you are just barely cash flowing or breaking even when you have 20% down with a 30 year fixed Mortgage.

I normally buy at 20% down, break even on the cash flow, and then years later make a LOT of money on appreciation on both Rent and Value.

In fact, I'm in Contract to buy a 3 Family not too close to Barclay's but close enough to walk there in 15 minutes.

Generally, in my opinion, if you are doing Buy and Hold in a hot area like Brooklyn near Barclays, you should be doing it with a 30 year fixed Mortgage so that you can have a consistent Debt Service Payment. Over the years, your rents will move up and eventually you'll receive great cash flow.

I have bought 8 multi-families in 20 years in Brooklyn. It's my experience that Brooklyn returns the love after you show love by buying these properties.

Just to give you a real world example on one of my purchases, in 2004, I bought a 3 Family in Clinton Hill for $890k. It broke even on cash flow.

Today, that property is worth close to $3 Million (yes, that's a $2.1 Million increase in Value). The break even cash flow is around $3,500 per month.

Some may call it lucky, but I've done this 7 times in the last 2 decades. I'm going to do it again really soon as well.

However, I would like to disclaim that "Past Experience is not Indicative of future experience." But that goes for ALL investments.

The 3 Family I have in Contract is near Classon Ave and Atlantic Ave. Not close, but within 15 minutes walking distance. I'm putting down 20%. I'll have a small cash flow. But I fully believe in 10 years, the $2 Million I'm paying for it will be at least $3 Million, if not $4 Million.

A lot of readers will find this hard to believe. But that's why it's such a lucrative market! Not everyone has the stomach for it!