Newbie Investor Needs Help

[Robyn J.]

Hello All. I literally just stumbled upon this forum while attempting to research real estate investing. I've put work on hold to dig into these forums and you guys are such a wealth of knowledge and experience, I'm hoping you guys can send some my way as well.

About me, I'm a new-ish investor. I own a condo (that I rent out to tenants) in a trendy (and expensive) Brooklyn, NY neighborhood and rent a separate apartment in the same building.

Recently, I've been contemplating selling my condo and buying a multi-unit property as a way of investing but, more importantly, increasing my passive income/cash flow as I am particularly cash poor these days. As such, I will need to use the proceeds from my condo sale to finance my next purchase. To understand my options, I've talked with a couple of brokers  and it seems that I'd likely net about $160-$180K from the sale of my condo to use as a downpayment.

I make a great salary ($300K base) but have some debt I'll pay off before buying again. 

That said, I'm thinking that 1.5M is as high as I'll be able to go to get into a multi-unit property but in the areas of Brooklyn that I want to live in, that will only yield me a 2-family unit, if I'm lucky. And that configuration can hardly be considered a house hack as I'd for sure pay at least what I pay in rent ($3600) as my portion, and likely much more. 

I'm open to buying/investing elsewhere (and continuing to rent in Brooklyn) but am incredibly nervous about being far away from my property and wouldn't even know where to begin. 

I'd love any thoughts/advice. Should I give up my Brooklyn brownstone dreams and buy elsewhere? Is 1.5M even realistic with my DP and salary in prime-ish BK? Is it worth it? Does it make more sense to continue to rent in BK and look at other markets to buy where I can cash flow quickly? If so, where? How? What would that look like? Where should I be looking? How do I get started?

Help?!

[Charles Xia]

Hi Robyn,

It seems like you have the right mindset already and you just need someone to point you in a direction.

A few questions to ask yourself. 

1.How comfortable are you letting someone else manage your rentals? It sounds like you want to see/be near your rentals so you can check up on it. I think in the podcasts they recommend looking somewhere within 2 hours of where you live. There will always be an opportunity within 2 hours. This will also give you a limitation of where to start looking. Highlight the neighborhoods within 2 hours from you and see the median pricing of the neighborhood.

2. Obviously sacrifices should be made to achieve your dreams. Since you are starting out you should probably sacrifice where you want to live for now, build a portfolio, and then come back and buy the Brooklyn brownstone you always wanted. You never know, the more real estate you look at, the things you want start to change, maybe you'll want to live in PA, CT, Nassau County, to name a areas around NYC. You might also have to commute further and rent somewhere cheaper to reach your goals, you decide what you can live with.

How I started, I looked on zillow and looked at what I could afford. Started picking neighborhoods I was interested in, started scanning properties until I found one that cash flowed.

3. I mention looking at median pricing because if you are a buy and hold cash flow investor (i am also a buy and hold cash flow investor) You really want to look for a multifamily unit probably less than $600k if you want it to cash flow. You can put more than 20% down to make it cash flow, but that reduces other numbers like your cash on cash return. In theory you want to spend the least amount of your money and more of other people's money (OPM) to build your portfolio. This also goes into to concept of leverage. Cash flow will be slow to start but will get better over time.

4. You mention you have a condo already? It sounds like you just bought the condo? Does that condo cash flow? Does the rent cover the expenses for that condo and maybe some of your rent of where you are currently living? There are some options you can look at instead of just selling it at the moment.

Happy Investing,

Charles