All Forum Posts by: Jason Lee

They cash flow by making very large down payments (at least 50%) or paying all-cash. My clients that spend +$2 million for investment condos don't really care about cash flow. As @Collin Placke said it's typically about capital preservation, or just because they feel like owning properties in NYC.

4K is a tiny mortgage. It sounds more like they don't have a mortgage and the combined monthly HOA and taxes are 4K (which is what I would expect for a 2.6 condo). That condo would probably rent for around 9K a month and so not accounting for vacancy, etc, they would be cash flow positive.

I think the cutoff is May 31 for residential. No idea about commercial.

Where in NJ (which county or counties and MLS)? I would start there. If it's Bergen or Hudson I can give you some suggestions.

Hi Robyn,

A lot depends on what you consider prime-ish Brooklyn but you’re considering two very different options. They’re pretty much at the opposite ends of the spectrum. If you can answer a couple questions for yourself it’ll become much easier to pick a direction:

1) You’re deciding between a “dream” (owning a multi-family in prime Brooklyn) and to continue renting and investing in a better cash flow area (probably out of state). I recommend you read David Greene’s book on long distance investing published by BP. It should give you a good idea of what it would look like to invest in another market and help you figure out if you have the desire and stomach to do it. My guess, from the info you’ve provided so far, is investing in another market is not going to be worth giving up your dream for.

2) Figure out your investing goals. Are you ok house hacking an A/B class property that doesn’t cash flow but where you can keep your monthly housing expense about the same but where you build equity, get tax savings, and where you will see future appreciation and increased rents? Or do you want to continue rent payments and have C (or worse) class properties that provide positive cash flow but that probably won’t offer much in the way of appreciation or increased rents? Along the same lines, do you want to have A/B class tenants or C (or worse) class tenants?

If it were purely about numbers then I think you have a much harder decision, but one of your options has the word “dream” in it, so I’d say you have you answer.

You should definitely sign an exclusive listing agreement for a couple of reasons. The main one being MLS's and many listing aggregator sites do not allow open listings to be posted. The next is that you want someone incentivized to pay for marketing (professional photography, floorplan, mailers, maybe staging, etc).

Depending on where the house is located you'll want it listed on either the REBNY/RLS (which covers western Queens closer to Manhattan) or LIBOR/MLSLI (which covers most of Queens but to the east). Most agents belong to one or the other, but there are some agents that belong to both. There are areas that have some overlap but if you get listed in the wrong MLS your potential buyer pool could be drastically reduced.

As for finding a good agent, I'd start with one that has demonstrated history of having closed deals as a listing agent. Sounds obvious, but most real estate agents in NYC make a living doing rentals. For those that do sales, it's typically the most seasoned or experienced that get exclusive listings. A quick verifiable way to gauge experience is to ask about sales volume in the prior 12 months. A seasoned agent in NYC should have sold at least a few million, especially if this is closer to Manhattan. Look at their past listings. Do they show nicely with great photography, staging, and decluttering? Do they have thoughtful, well written listing descriptions?

The two main things to look out for in the exclusive listing agreement are the commission and the length of the agreement. A shorter agreement is better for owners and vice versa. Most agents try to get one year. I usually do 6 months. I don't agree to less because I spend money on professional photography, virtual staging, and even some renovations. Commissions get tricky. There's not much transparency and most sellers don't understand how they work. Most real estate boards require agents within the board to cooperate and split commissions in half. Agents are not required to split commissions with agents outside of their board. Some do, some don't, and it's like the wild west in Queens. Obviously, it's a huge disservice if a listing broker will not offer commissions to buyers broker as that cuts down the buyer pool dramatically. Also, most boards require agents to split the commission 50/50 with other agents in the same board unless the owner agrees to something else. Some listing agents get their owners to agree to something else without explaining the pitfalls. I've seen a lot of listings in Queens where the buyers broker is offered 1% or even .5%. They're cooperating, sure, but many buyers agents probably won't bring their clients to that listing. Meanwhile the seller really has no idea what's happening. Or, there are sellers that just want to try to save money on commission and offer something really low. I get it, it can be a large sum, but as the saying goes, you often get what you pay for. Yes, you can find an inexperienced agent or bottom feeder to take a listing for next to nothing, but you're probably not going to get good results. We're in a softening market now where many developers are actually raising commissions.

I can go on and on about these topics but this hits most of it.

I'm not sure you can do a 1031 from within a trust but @Dave Foster will know. If you are the beneficiary I'm not sure you get a step up in basis either, so there could be some pretty hefty tax consequences if you do sell.

We could use more info like your original purchase price and if there have been renovations that change the cost basis in a significant way. 

Your realtor is talking about the STAR program which is a property tax credit and exemption (not a reduction or change in assessment) for those that use their home as a primary residence. The benefit is probably not worth committing fraud over.

The sponsor needs 15% in contract to get the condo's offering plan declared effective and filed with the AG so most sponsors will do what they have to to hit that benchmark. Discounts are not usually tied to hitting Fannie guidelines as most sponsors have a preferred lender lined up to do all the deals in the building. It's common to offer the inside pricing to friends and family, the sales team, etc. Insiders are often allowed to flip/assign while most other buyers are not (you usually have to wait at least a year after closing to resell). Whether this is a good deal or not depends on where it is, what it is, and what price point.

I don't think you'll find anyone that will do a heloc on an investment co-op. Like, @Alex Furini said, cash out refi is probably your only option. Or you could sell and put the profits into something a bit more liquid. If you occupied the home 2.5 yrs ago you still have a small window to get the capital gains exclusion on the sale (if it's possible to sell it with the tenants in place), or do a 1031.