NYC no money down disaster turned profitable investment.

[Richard Rozo]

Investment Info:

Condo buy & hold investment in Rego Park.

Purchase price: $250,000
Cash invested: $25,000
Sale price: $413,000

In 2006, real estate market was in a bubble and I was afraid I would never be able to afford an apartment. I borrowed 25,000 for down payment and purchased a 2 bedroom Co-op apartment near the peak of the cycle before the Global Financial Crisis. Refinanced during the beginning of the crisis before comps collapsed. Was shortly upside down in the apartment. I house hacked by renting out one room. Held on and renovated the apartment and then rented the whole thing out.

What made you interested in investing in this type of deal?

This deal actually did not start out as an investment. I was just looking for a place to live but I decided to purchase this apartment which had two bedrooms for the same price as one bedroom would have cost across the street because it was a different more posh zipcode.

How did you find this deal and how did you negotiate it?

I went to an open house for a different apartment in the same building and the seller posted a flyer for his apartment in the building so I went to check it out. Loved the apartment He said he had two offers on it already. $235k and $245k. I asked him what his "buy it now" price was. He said $280k. I agreed. Before we signed the contract though I got cold feet because the real estate market started to turn lower. I lowered my offer to $250k. He agreed.

How did you finance this deal?

I borrowed the down payment from family.

How did you add value to the deal?

I renovated the kitchen and bathroom. I found solid tenants that paid all expenses. I moved back in and refinanced multiple times. I took out equity and let tenants pay the mortgage down while the apartment appreciated.

What was the outcome?

Rents rose over time and the apartment finally appreciated enough to take out $94,000 in equity. Rented it out again for three years and just sold it for another $138,000. $232,000 equity withdrawal minus about $20,000 in renovation costs means $212,000 return on $25,000 equity (which was borrowed.) 8.48X return. Granted it was over 14 years but I bought at the peak in the last market cycle.

Lessons learned? Challenges?

taught me about location, house hacking, creative financing, value creation, how to deal with tenants and to play the long game in a high cost of living market.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

There were no brokers involved. My bank was Wells Fargo.