All Forum Posts by: Adam K.

@Ryan H. At first glance, $2.5MM is way too high. You're getting $6K/month in rentroll and even if it were $9K, which it's not, there are more expenses than just taxes you have to take into consideration to get to the NOI. It really depends on the leases and the condition but if you were getting $9K/month in rent, you could probably get $1.75MM-$2MM. At its current rent with the potential for higher and the favorable zoning, I'd guess more along the lines of $1.2-1.5MM.

@John Hickey Rent stabilization means you can't raise the rents more than the prescribed amount to current tenants. The past couple of years that amount has been 0% for 1 year leases, and 2% for two year leases.

https://ny.curbed.com/2016/6/28/12050336/rent-free...

So basically, you won't be able to raise those rents much until people move out. And if I were paying $500/month in bushwick, I don't think I'd be moving anytime soon.

@Jay Wilson

I am an investor and broker in Brooklyn. I have a couple multi-families out here that I manage (1 for myself and 1 for the investment fund I co-founded) and I'm pretty familiar with Crown Heights, Bushwick, etc. Give me a shout if you want to connect.

@Daniel C. Does he have a financing or appraisal contingency? Once that first appraisal comes out he's pretty much stuck with it unless he can show they made a fundamental mistake, plus appealing an appraisal with the lender takes awhile.

He has three options if he has a contingency. 1) Start from scratch with a different lender and hope a different appraiser sees it differently. 2) Borrow $120K from friends/family/private lender to make up the difference. 3) Exercise the contingency and give up on the property.

The seller ought to know that this will be a problem with any non-cash buyer so may have to be encouraged to be patient.

@Shadman S.

The basement is definitely not legal. Not to mention that renting out rooms individually is also illegal unless you live in the apartment.

I mean if you think it's a good deal there's no harm in making an offer but don't have high expectations.

@Boruch Leivi Bartfield

I suggested FHA because it requires less cash to get started and also the lower the down payment the greater the power of appreciation will be on your ROI. And as I said, in this market, it's all about appreciation. That's why I said what I did about your 9-5. It's great that you want to get started now and the sooner the better - but the goal should be to build and maximize your net worth, not replace a salary with cash flow.

I don't know how much capital you have access to, but whatever it is, the advice remains the same. Get the most units/bedrooms you can for your money in a neighborhood you feel comfortable living in. If you have enough capital to get a 3 or 4 unit in a gentrifying neighborhood that'd be what I'd try for.

@Shadman S.

Definitely sounds like a good deal ($5800 rent on 580K is practically unheard of out here) but if it's a 2 unit then the basement is not legal. That will mean you have to take the kitchen (at least the stove) out when you get it appraised. Insurance might make you take out the full kitchen. It will also be comped to other 2 units.

Also if she's looking for a cash buyer you probably won't get any contingencies and as stated above you're not closing anything within 30 days with any kind of financing. A hard money lender is a very expensive option and it takes time to refi (max LTV can be anywhere from 65-80 depending on the lender) so budget for holding costs. Are you sure it will appraise well on the refi?

Best of luck.

@Boruch Leivi Bartfield

50% rule is pointless in the NYC market, just ignore that. Ignore that 200k suggestion that's not gonna buy you anything worthwhile here. Actually ignore mostly anything you read here that is not NYC-centric. Plenty of good stuff on the message boards but the vast majority of the content on the site won't apply to this market.

Also you're not going to find 10% cash on cash returns anywhere around here especially not on a single family house. Brownsville might be a good long-term appreciation play but it's a rough area with higher than average vacancy and older housing stock / high maintenance/capex costs. 

You need to figure out how much money you have to invest. You also need to stop dreaming about quitting the 9-5, unless you have seven figures of capital there's no way you'll generate cash returns even close to live off of. Real estate is a get rich slow scheme. 

The absolute best thing you can do is buy a place with an FHA loan with the most total bedrooms you can, live in it and house hack. You won't cash flow much at all but there are places where you can live rent-free and build equity and hope for appreciation. Or invest out of market but I am not an expert in that route.

@Chris Breezy

Definitely look to househack. It will be tough to find a place in NYC that will let you do FHA and that is in a decent neighborhood but I promise they do exist. I see listings that fit this from time to time in Brooklyn (3 bedroom condos in east Crown Heights go for $500k still for example) but your best bet might be a duplex in the Bronx. You could look for a 3 over 3 in the 500-600k range and live in one of the bedrooms and rent the other 2 and the other unit and definitely break even at least.

Edgar, if you want them out you'll  have to deal with not getting rent. You have to give them 30 days notice and end the month to month arrangement. Once it ends they have to vacate. If they stay you can evict them as a "holdover" case which is much better and quicker than a "nonpayment" case. You CANNOT CONTINUE TO ACCEPT RENT FROM THEM. If you do then the month to month arrangement continues.

I would definitely not get the city involved. You have been accepting rent so you are on the hook for any violations/fines/etc.