All Forum Posts by: Joe Jor

This is fairly standard in the Westchester area given most homes are 100+ years old and the building code / inspectors didn't really come to power until the 70s or 80s.

Likely your real estate agent will note the issues.  You can:
* accept as is (or ask for credits)
* demand the seller fixes it and gets town sign off
* demand the seller rips it out (e.g. an illegally finished basement)

In theory, these changes should be grandfathered in and aside from legitimate safety concerns (e.g. GFI outlets, etc), they would not have to be brought up to current code.  Set up an appointment with the town building department.  Don't give an address, but talk through hypotheticals.

It depends town to town and how grumpy the building inspectors are.  I am dealing with a basement that had an illegal stove and they turned the legal 1/2 bath to a full bath.  They town asked me to get an architect.  The architect said they usually grandfather the bathroom work in for $5k - $10k.  The stove had to go.  

In my case, the plumbing inspector was a problem.  He had an issue that the water lines were 1/2 inch and the toilet drain was PVC.  Both of these had worked fine for 30, 40, 50 years or more.  I had to upgrade the waterlines to 3/4 (ripping out the wall, retiling) and replace the drain line with metal pipe, (dig up floor, plumb, concrete, retile).  He also wanted a backflow preventer installed in the main sewer line.

About $25k so far, but the end is in sight.

Just my experience ...
Joe

Luis,

Sounds like you did a great job on that first property.  I agree with your conclusion that it doesn't make sense to refi into either a higher rate mortgage or a similar-rate mortgage that you have to put money into out of your pocket.

The other option is to use a non-FHA load to purchase the next property. If it is somewhat habitable and you can live in it for a year, you can get primary residence financing. This will allow less than 20% down. (This article suggest you may be able to go as low as 5%)

Joe

Not to sound like a jerk, but it may depend on what you define as "a deal."

Westchester is an expensive market.  For me, I accept not having positive cashflow for a few years.  I also have many time constraints and thus can't do/manage massive rehabs.  That is me, everyone is different.

Joe

I agree, assuming you only pull out what you put in, you will be in a similar position for property #2. I haven't used hard money, but I hear there is no holding duration requirement; some traditional loans require you to hold it for 6 months or 1 year.  Also if the property is a wreck, you may not even be able to get a traditional loan.  Also I hear with hard money, it is quick turn around with less document checks.  In NY it will take 70-90 days to get a mortgage turned around.

Fake numbers:

* Purchase: $400k

* Fees/Transaction Costs/Repairs/Holding: $200k

Assuming equity requirements are 25%, you'd need the property to appraise/sell for 800k to get your 600k back out (and return to the lender).  While your immediate position doesn't change, you now own a property with 200k of currently inaccessible equity.

Also with your first one, if you can put down 5% or equally low, occupy it, and do a live-in flip, you may not have to refi; save up for another 5%, do it again, new primary loan, etc.  Not sure all the rules around low down payments, so this may be a falsehood.

Joe

As a Westchester resident, I can confirm what Kyle stated, it is very expensive.

The short answer is you can use hard money to borrow the 500 - 600k.  This is essentially a cash offer; it doesn't have to be your cash.  A private loan or rich uncle is another example.

The alternative with a mortgage is that you have to BRRRR sequentially, not in parallel.  You'd need to ensure your ARV is 20-25% higher to get your original cash back out while meeting the refi equity requirement.  (this description excludes other variables such as inflation, mortgage rate drift, etc.  - Be sure to factor in transactional fees and costs you may incur during the process).

Creative financing, conceptually, could be another alternative.

Joe

Conceptually think of house hacking in the NYC metro as a reduction in rent.

It all boils down to the numbers, but if the direct property costs (mortgage + insurance + tax + capex/repairs + vacancy) - the income (rental income) is less than your rent, you are effectively saving yourself money, aka "rent saving"

I did this in 2014 in Westchester county (different location, different time, different market), but effectively cut my rent in half.

Regarding Basit's suggestion, I would follow this ONLY if your cashflow from the other market is greater than the "rent saving" in NYC on a per dollar invested basis.

Joe

Some areas are more multi-family friendly, like some of the towns I mentioned.  Others are not and tend to be VERY expensive (Katonah, Pleasantville, Rye, etc). 

I just Redfin'd Peekskill as an arbitrary test; with one exception all the multis are $850k or less.

In New Rochelle (Redfin'd again), roughly $850k is the entry point.

Joe

Quote from @Brad Haughton:

Since I know real estate is kind of like a numbers game but what if your weakest link is you're not a numbers person but can you still technically do real estate investing?

Partner with someone who is good at underwriting or do research; once you have the numbers, it is just arithmetic.

Sure, comparing towns that are roughly equal on social issues, and comparing properties that are of similar condition and size, the properties will generally become more affordable the further you travel from NYC.

Generally New Rochelle will be a little more expensive than White Plains

White Plains > Elmsford/Sleepy Hollow > Peekskill > Poughkeepsie > etc. etc.

Joe

Buy where the numbers makes sense and social issues (schools, crime, etc) are within your tolerance.  I know that isn't very specific and probably not what you are looking for.

What is your goal?

* Live rent free - The more units the better; the bigger the price & down payment; further from NYC

* Reduce current rent/mortgage payment via house hacking - closer to NYC, can be done with less units

* Invest in a cashflow negative but greatly appreciating property?

* Something else?

The challenge in lower Westchester is everyone is looking for small multi-family so the competition is high and the supply is low.

Let me know if I can provide more insight.

Joe