All Forum Posts by: Drew Donovan

Agreed with the sentiments that the mass exodus is overstated. The pandemic has changed the need to be in the city every day but most of the high paying jobs will have people coming in to the office more often once it is safe to do so. With that said, the new development condo market has taken a hit and will take years to recover. Prior to the pandemic, building permits were at an all-time high and new development inventory supply far outpaced it's demand. Now is not a bad time to buy but I anticipate it will continue to be a buyers market for 12-24 months before the cycle picks back up. 

With all that said, do not think of these condo units as investments; virtually none of them would pencil out if you were purchasing as a landlord. Even with the decreased values, if you rented them there would be negative cash flow and it'd be a speculative appreciation play. Feel free to contact me if you have any other questions as our company manages properties throughout Manhattan, Brooklyn, and Queens and have the pulse on the rental and sales market that you are interested in.

Drew Donovan

Stone Jin, thank you for your reply. I completely understand your take on the appreciation play. My condo is about 45 minutes by train to NYC. Over the past 10 years, there have been roughly 1,000 luxury rentals developed as the market continues to expand/spread outside of NYC; there are another 500 or so rental units in development in the immediate downtown area. The condos are very inexpensive relative to the surrounding areas. As the rentals continue to come to market (no condos are planned for development as they don’t pencil out), I believe the demand for existing condominiums in the area will increase as the cost to buy will be far less than what tenants are paying in rent. Outside of the financing, the difficult part for me is making sure I get the condo at the right price and m keeping the rehab cost down as best I can. The common charges and taxes take up a substantial part of the proforma. It’s probably best that I continue to be patient and disciplined if I plan on investing in my area

Long time listener and reader, first-time poster.

I have been scouring my area (Central New Jersey) for two years to find a value-add deal and have had very little luck. I am a strong believer in the BRRRR strategy but have found most investment properties in my area are asking astronomical cap rates; the worst part is they are missing many normal operating expenses in the setup sheet. I have mainly been looking for 4-10 unit buildings. Due to the lack of available inventory I am thinking about buying another unit within the condo association I currently live in (mainly an appreciation play with limited cash flow; our area was hit hard with the recession and many people found themselves underwater on their property). I am on the board and well aware of the rental process at the association as well as the current financial status of the association. I'm really looking for someone's expertise/experience on how they would finance it or have financed it in the past and how it worked out.

1. Option 1 - Pay for the property and renovations in cash. Cash would come from: partial my own money, partial funding from HELOC on my own unit, remaining from friends/family hard money. Once the unit is renovated and rented out, I assume that the unit would have to be refinanced based on the market approach and not based on NOI. Would a lender even factor in the rental income for the financing? I would be approved either way but am curious to know as this could impact future deals.

2. Option 2 - Take out a mortgage for the purchase and pay for the renovations with my own personal funds. I believe I'll ultimately have more money into the deal if I proceed this way. Also, I'm not sure how they will factor in the HELOC I recently obtained

3. Option 3 - Open to hearing anything else you may recommend

I prefer to leverage (not only because I have to, but also because I'd like to have cash available for future real estate acquisitions) in this type of deal but do not feel I truly know what the property will appraise at if I proceed with option 1. Any help is greatly appreciated.