All Forum Posts by: Adam K.

@Maximilian Gabath it all depends on what you're looking for. You can probably get better cash flow elsewhere but far less potential appreciation. But there are opportunities in Brooklyn (but perhaps not in neighborhoods you want to live in, depends on your commute preferences, etc) to do what you've described and have nearly all of your mortgage paid for. Compare that to whatever rent you're playing and the neighborhoods you want to live it and make your decision that way.

I am house hacking in a truer sense, in that I rent out the other bedrooms in the apartment I live in. So I cash flow a little bit and don't pay rent, which is nice (not to mention the crazy appreciation). If you and your wife are willing to do that, it opens up more potential opportunities.

@Ingrid J. I've lived in NYC for 7 of the past 8 years (had a year of traveling in between) - in Manhattan, both upper and lower, for 5 and now in Brooklyn for the past 2. I've had a lot of fun in both places and it's definitely an exciting place to live.

It is expensive (both to rent and to own) in all of Manhattan and the parts of Brooklyn and Queens that are close to Manhattan. But it's not impossible to get in if you have capital and the right arrangement. But of course, you should spend some time here before taking the plunge. I've met (and lived with some) Norwegians/other Scandinavians that have come over here for a year to live.

Feel free to send me a message if you want to know more.

@Adam S.

Thanks for the feedback, negative though it may be. Can you elaborate on why you would never do a tax sale again, even though you were successful?

You're the first person I've seen to suggest that the law is untested --- the law seems pretty clear. I spoke to several lawyers (I am an attorney myself but not in Louisiana) and did a lot of reading and it seems fairly settled that once the redemption period is over, an action can be brought to quiet title and take possession. The question is whether the action will be successful because of how murky the chain of title may be. Though, supposedly, the city fixed that with the most recent sales. Who knows.

My partner and I felt that it was worth the relatively small investment to see what happens. We bought 5 certificates, 1 has already been redeemed (without us contacting the owner), and with the other 4 plus the 2015 property taxes that we paid (with regards to your suggested strategy to not pay the taxes, that seems downright silly --- why would you purposely cede the first position lien? If you've already bought the certificate, there's no point in letting it go back to the tax sale...), we've put in $3500 total. Not much split between two people.

Of the 4 remaining, 3 are houses and 1 is a vacant lot. Obviously we don't know the interior condition of the places, but looking at them for the outside they seemed better than "worthless".

#1. A duplex in St. Roch worth between $75K-125K according to various real estate sites. According to crime stats, a low crime area. It seemed as if people were living there, though it's not in the best condition, it's certainly not "worthless".

#2. A house, also in St. Roch, worth between $60-$100K, also a low crime area. Can't tell if people are living there, as there seems to be a auto body shop operating out of the garage. That one could be dicey.

#3. A 1900 sq. ft house in Central City close to the Garden District worth between $90-$150K that appears to be occupied and looks in very good condition. Can't imagine this wouldn't get redeemed.

#4. A vacant lot in a neighborhood in Hollygrove surrounded by houses worth $100K-150K according to Zillow. With the lowest crime rating on Trulia. Seemed nice to me out there, but apparently even the mention of Hollygrove is enough to scare people. This is the one most likely to not redeem, I would say.

We are still debating whether to contact the owners. It is probably a good idea, but if there's even a 5-10% chance that they don't redeem and we can get title, that's worth it given the minimal outlay we have invested. Ultimately, we thought it was worth the risk, because worst case we're out a few grand, best case, we get property worth 6 figures, and most likely case, we pick up double digit returns for almost no work.

@Jerome Zhang

It's in Prospect Lefferts Gardens.

I'm sure you've looked into this, but if the house you're selling is owner-occupied then you can write off 250K (or 500K assuming your parents are married) of the capital gain.

http://www.nolo.com/legal-encyclopedia/the-2500005...

If you have to use all the capital, though, in a 1031 exchange, why not aim bigger and just put 25-30% down on a higher value building? The risk isn't all that different.

@Jerome Zhang

Jerome, I think a 5% cap rate is pretty standard for the listings I see, but as Matthew has shown, if you can pay below listing that helps your return, and if you get creative it helps your return. Also keep in mind that rents are rising pretty quickly in the right neighborhoods so that 5% cap will be higher in the future.

I've only got limited experience and got very lucky with my first MF purchase thus far (800K for a 4 unit in a very hot neighborhood with a current rentroll of ~$7K that is still about 10% below market) but I think the same advice applies here that would to most places - keep digging and get creative.

Is there any reason you're going to put 50 - 75% down? Interest rates are still low, there's no reason not to take advantage of that and leave yourself with enough capital for 2 buildings. Putting all your money into one building is a pretty big risk.

@Matthew Saskin

Are you still based out of NC? Do you have partners in NYC? Just curious how you've gotten involved here and gotten familiar with the neighborhoods. I'm starting the search for my next purchase -- do you operate mostly off-MLS or do you find listings there, as well?

No. LLCs cost money to form both in terms of actual fees and lawyer's fees. Also, if you are using a mortgage, you are risking getting your due on sale clause called by the bank, as they do not lend to LLCs and transferring to one costs as a change of ownership. This doesn't happen often, but it is a risk, especially if you do it right away. If you're paying cash, then ignore that last part.

I'm not an expert, but I think you're better off just buying an umbrella insurance policy, and I also think if you're foreign, your assets are going to be a lot more difficult to get a hold of in a potential U.S. lawsuit.

@Jermaine McIntosh What neighborhood do you currently live in? It's always best to start with the areas you know the best. As far as a cash-flowing multi-unit for 400K or less --- you're not even going to find those in East New York without stumbling upon a probate/off-market deal. Cash flow is very hard to find in NYC -- maybe deep out in Queens or the Bronx, but the trade-off is that the areas are not as likely to appreciate as quickly. Essentially, you need to choose between cash flow and appreciation potential. I've also heard that you can find deals in north NJ and maybe New Haven, but I haven't done much investigating myself. Good luck!

@Kimberly T.

There is a huge, huge difference between someone recreationally using drugs and dealing them / "cooking" them. The vast majority of people who use weed, cocaine, etc. don't also go on to use meth or heroin or whatever and tend to actually function quite well in professional life (much like alcoholics do - a "legal" drug). I'd wager that plenty of people you know have used / use these substances. To call the possession of a small amount of cocaine a "major crime" is ridiculous. You seem to have fallen for the continuous scare tactics of those who demonize drug users and let your imagine get away from you. A little bit of coke doesn't equal gang shootouts at your building.

Is it ideal to have a tenant who does drugs? No. Would I want to get that person out of there when the lease was up? Absolutely. But involving the cops in this situation is a huge mistake that only escalates the situation and accomplishes very little.

@Aundre Oldacre

 Welcome! I live nearby and there is so much development it's crazy. It's great that you picked up something in Crown Heights, especially that part.

Any specific areas you're looking in?