Clinton Hill Brooklyn Deal Analysis

[Evan Ernst]

Hi Guys, I have an accepted offer on an off market townhouse in Clinton Hill Brooklyn. I'm brand new to all off this and although I think it's a good deal, it's still hard to get the numbers to look decent. Any advice would be greatly appreciated. it's a 2 family zoned as a 3 family which would only require light renovation and a kitchen install to bring it back to 3. 1.3k purchase price, I'm bumping to 1.32 and asking for a $20k seller concession to help cover closing costs (not reflected in spreadsheet). avg sqft price of neighborhood is between $650-$750 so at $540 it seems like it would be a good deal. Broker suggests it would probably sell open market for 1.65 and comps like appropriate but I just don't know. But looking at the spreadsheet below, the ROI is only 7% and the cash ROI less than 3%. I'm looking to buy and hold to develop equity and eventually have it as a cash flow property or something I can move up with in a like kind exchange, but I can't tell if this makes sense as such or if I should be trying to find something else. I kept my numbers really conservative. appreciation will probably be closer to 5% each year, and the rents in the area are between $2,000-$2,500 so I might be on the lower side for the units but I figured I would need to get things started and then could clean things up a bit over the years. Any thoughts? Maybe these numbers are actually good and I just don't know it. Sorry if this is a silly post, but I'm really trying to make heads or tails of this so I can move forward confidently or bail if it's stupid.

[Adam K.]

@Evan Ernst Your numbers don't seem accurate to me. Insurance and taxes look way too low. Assuming you're only paying for water, those utilities are right. Maintenance is too low unless it's brand new rehabbed. Otherwise expect $100/unit/month at least. Rents are also going to be very dependent on how nice the unit is and where exactly in Clinton Hill it is. Do you know the neighborhood well? Close to the subway?

On the other hand, 12%PM is crazy high and you should really self-manage if you can. It's not hard for a 3 unit.

Ignore people talking about 7% cash on cash as a goal for NYC. Not a reasonable goal. As long as it's cash flow neutral at the start you'll do fine. If you want to invest for cash flow, don't invest in Brooklyn. And if there's really 200k in starting equity (really research those comps...if something seems too good to be true, it probably is) that's probably going to pay off nicely in the end.