All Forum Posts by: Jason Lee

Grove Street? First Republic, Woori, Santander, Investors all look to have done deals in the building within the past couple of years so I'd probably start there. 

- With a budget up to 1.5M you’re not going to find anything in Harlem, LIC and most of Astoria. You’re going to have to go a little further out but there are a lot of options. I would look at Sunnyside and Woodside, Bushwick, Bed-Stuy. Stay near the trains. You can find something in good condition that’s set up as a legal 2 family with maybe a finished basement that’s set up as an in-law suite (which most would probably airbnb out, or occupy). You can also look at Jersey City (Heights or Downtown) and Hoboken where your budget can get you a little more like a 3 family with maybe parking or a garage.

- There are NYC and NYS mortgage recording taxes which is 1.8% on the mortgage amount under 500k and 1.925% on the mortgage amount above 500k.

- Get a pre-approval. Most first time buyers don’t have a good idea of what they can afford or what kind of mortgage they will be able to get. Get a referral for a banker or mortgage broker (I wouldn’t call an 800 number or walk into a local branch). A good banker will explain all your options.

I’d probably stay away from anything that needs too much work. Holding and construction costs are high and tuition for novices can be steep.

For a house hack be realistic about where you're willing to live and what you really need for amenities, commute times, etc. It'll help you focus your search and save you a lot time.

- Direct mail sounds like it would be a waste of time and money. Find an agent that has experience doing these types of deals. There might be neighborhood brokerages that have relationships with local landlords and have access to off market deals, or much larger brokerages that have a lot of off market deal flow due to sheer size. My firm has 2500 agents in NYC and there are a ton of off market deals, most of which are multi-family.

- @Basit Siddiqi has networking events in Midtown. I haven’t been yet but thinking of going to the one on the 7th (it’s literally down the street from me).

As of June 14, 2019 NY landlords can no longer charge an application fee and cannot charge more than $20 per applicant for credit and background checks. You can charge each applicant for a credit/background check and there is no per family limit that I am aware. I would recommend you check each adult occupant.

REBNY's interpretation of the new laws is that a broker representing the landlord can charge "reasonable" application fees but the credit check portion must still be itemized for no more than $20.

Another possible workaround is to tell the tenant to get their own broker or get a broker that acts as a dual agent for both you and the tenant since a broker representing the tenant (as tenant's broker or dual agent) is not limited in charging application or credit check fees. However, you're then introducing broker fees which can be prohibitive at certain price points.

You can read up on the new laws here:

https://www.nysenate.gov/legislation/bills/2019/s6458

Where in the NY area are you looking? If it's close proximity to NYC or North NJ then amazing deals are hard to come by. This area is about appreciation, not cash flow. You won't find anything where the rent will cover your housing costs using an FHA. In most cases you will have to make a very large down payment to see any positive cash flow. On the flip side, if you hold on for awhile you should see very good appreciation and increased rents.

Most of my high income clients don't have the time, energy, or interest in BRRR or flipping, and their version of house hacking is usually turnkey properties with not much "hacking." If they buy a multi-family and reside in one unit, they're more concerned with location, commute time, zoned schools, etc, and much less with ROI and cash flow.

Proceed with caution. I've helped clients buy in land lease buildings but in all those cases there was something like 80-100 years left on the lease. These properties usually trade at a discount because of the stigma but my clients know what they're getting into. Most lenders will not give a mortgage in a ground lease that expires in less than 30 years and you can expect the common charges to go up significantly if a new lease is negotiated. That's if you get a new lease. Worst case is the terms are so bad and the common charges go up so high they make the condo units worthless, or the landowner refuses to renew so he can build or sell something more profitable. Those two scenarios are playing out right now at two ground lease co-ops I know of. One is a couple blocks from Central Park where the apartments should be worth a few million easily. The maintenance has gotten so high they're essentially being given away. The other is in Chelsea where the owners are being evicted!

The rent to buy math is out of whack here and so there really is no right or wrong answer. It really depends on your own specific numbers and goals. It's hard to give you a direction without knowing your specifics.

Do you really want to live in a cheaper rental or have a longer commute just so you can invest? If you're ok downgrading then go for it. Curious what kind of investing appeals to you?

It's a pretty good time to be a buyer... prices have softened, inventory has risen, money is still cheap. Meanwhile the rental market has gotten worse for tenants... there is a lot less vacancy and rents have been going up. Half of my landlord clients are accidental, meaning they moved out of their primary residence for whatever reason and have been renting out their places ever since. Whether they bought at a peak or at a bottom, they've pretty much all seen great appreciation. On top of that, they get good rent increases each turnover and have very easy A/B+ tenant class. These turn out to be very easy investments.

If you plan to first live in this property, are you ok living in a cheaper, up and coming area? Where do you commute to and what do you consider a short commute? Tough to answers these without knowing a little more.

If you don't have the time, energy, or interest in searching for properties on your own, don't want to find your own lenders, attorney, inspector, etc on your own, don't feel comfortable negotiating for yourself, and want someone experienced who has a fiduciary duty to you representing you, then I recommend using a realtor (says the realtor). 

Hi Paul, Welcome to BP! Here are my thoughts:

1) I work with many first time buyers and first time investor buyers and obviously none have any RE experience. It sounds like this is something you could handle just fine considering you and your wife's experiences.

2) Speak to a realtor experienced working with investors to help narrow your focus, pre-qualify you, etc.

3) Off the top of my head a multi-family purchased for around 1.2M with 35% down would cost you around 4K per month for mortgage, taxes, and insurance, and that wouldn’t take into account any rental income, and it would also leave you a good amount of cash post close. I'm sure there are many different ways you could go about structuring this.

4) For growing families, things like ROI and cash flow often take a back seat to quality of life factors. Think about proximity to family friendly amenities, parks, schools, childcare, etc.

@Michael Baum The OP is not renting out the entire apartment and would be present and so it qualifies as a rooming/boarding situation which is legal for under 30 days. Could have issues with the law on advertising though depending on the set up.

Lenders qualify you by looking at your housing debt-to-income and total debt-to-income. So as others have mentioned you are limited by your income, not your savings. With 45K salary the max monthly amount a lender will want you spending on housing (mortgage, RE tax, and insurance) would be around $1500. If you're looking at a 1M property with 700K mortgage the monthly housing expense is probably going to be more like $4000. That means you'd need income of at least 120K. A good mortgage broker or banker would have explained all of this to you (which is why I always discourage clients from going through 800 numbers, websites, or branches). Get a strong referral.

On the bright side you've got good savings (more than many of my first time buyer clients), your income is sure to increase, and you're trying to start this young!