All Forum Posts by: Matthew Saskin

You may also want to look into whether you can wrap them into a commercial loan that's cross-collateralized over all the properties.  We're in the midst of moving 5 duplexes with conventional loans into a single commercial.

As for terms (eg; balloon or otherwise) - a lot is going to depend on your appetite for risk.  We're moving to a 6 year fixed/20 year amortization loan with a balloon payment at the end, however we have negotiated the bank adding in a guarantee of renewal to a new loan at the end of the 6 year term at the same % above prime that we close the loan at (eg; we're closing now at 4%, .75% over prime.  If in 6 years prime is at 6%, they'll give us a new loan at 6.75%).  To me, this is an acceptable risk given the current cashflow from the property and the likely changes to interest rates over the intervening years.  Your own appetite for risk will vary.

Would I prefer a 20 or 30 year fixed loan?  Absolutely.  That said, at the moment it's more important to me to get rid of the 5 conventional mortgages and there are some additional benefits to moving them to a commercial loan.

To be very honest, with $30K to work with, there's very little you'll be able to do anywhere in NYC short of finding a duplex (triplex is probably out of the question) in a gentrifying area (eg; Bushwick, Ridgewood, etc.) and using an FHA loan to get into it with 3.5% down, but that would also require that you're going to owner occupy one of the units.

I won't comment about areas outside of NYC as that's not my area of expertise/not where I would personally purchase rental properties.

As for NYC, there really is no "hood" anymore.  There are still a few areas of town that wouldn't make sense from an investment perspective (Brownsville BK as an example) but everywhere people were scared of 10 years ago (Bushwick, Bed-Stuy, etc.) are all either gentrified or rapidly gentrifying.  By way of example, 5 years ago in Bushwick gut-renovated duplexes could be had for 450-500k and triplexes for 600-700k.  At the moment, duplexes go for anywhere between 900k-1.2m and triplexes, on the rare occasion they are listed/sold, go for anywhere from 1m-1.5m+.  There are other neighborhoods that are a comparative deal - I have my sights personally on Ridgewood as the next area of expansion once rents in Bushwick hit a peak and tenants need somewhere marginally less expensive to go.

We've done very well in the NYC market, and I highly recommend it for a number of reasons I'm happy to go into...that said, the barrier of entry for anything but an owner-occupied FHA loan is very high.

Happy to talk to you more about our experiences in NYC and help out where I can.

 For a prime location, and with a "name brand" brokerage (in NYC - Elliman, Corcoran, etc.), that's normal.

I have properties in various parts of NYC and depending on the area and the firm I use I end up with one of three scenarios:

-1 month fee, landlord pays: up and coming areas of town (eg; Bushwick, Bed-Stuy a few years ago)

-1 month fee, tenant pays: lower end/mass market brokerage firms, use this option for "run of the mill" properties

-15% fee, tenant pays: higher end/"name brand" brokerage firms, regardless of specific area.  I use this for higher end rentals where I'm looking for the caliber of tenant that a name brand firm attracts

 The first place I'd look is if the local bar association, association of realtors, etc. has a standard/form lease.  I'm using a blumberg lease in New York (fairly common) and a standard lease my property management firms uses in North Carolina which, as far as I know, is based off a template provided by the NC Bar Association.

 Ditto this.  Once they are screened and in the door, it's not my right to know any more about them as long as the rent is paid on time.  That said, we do set expectations with all of our tenants that we assess late fees *the moment* that rent is late, and that we begin eviction proceedings as soon as we are legally able to if they don't pay or violate any terms of their lease.

All going to be highly dependent on your lenders, but it's the path we chose and it worked perfectly. Basically, did an initial FHA loan for an owner occupied 3-family, about 18 months later refinanced to a non-FHA loan primarily due to interest rates dropping. Fast forward a few years (after we had left the property) and we ended up selling and using a 1031 exchange to purchase additional properties, but doing a cash-out refi to finance other investments was also a potential option (outlined above)

You can buy multi-family with an FHA loan, you are required to owner-occupy for a period of time (I can't recall if it is 12 or 24 months). My opinion - starting out in multi-family via an FHA loan is a fantastic way to get things moving on the REI front. We did the exact same thing for our first property; bought a 3-family with a 3.5% down FHA loan and lived in it for the first 2 years.

However you'll have a hard time converting to commercial in NYC with a single property of less than 5 units.  Need 5+ units to go commercial, or multiple properties and a lender willing to cross-collateralize. 

 Kamar - if you don't mind, what's your current loan balance?  Even if you find someone to write a cash-out refi (which is *very* tough in Brooklyn - I've had a lot of experience in the area), chances are you're not going to be able to take out significantly much of your equity - at least not enough to make a new purchase.

For what it's worth, we bought a 3 family in Bushwick ~4 years ago for $600k, realized last summer that it was now worth at least 1.2m, but couldn't for the life of us find any bank that would do a cash out refi.  In the end, we ended up selling (for 1.3m), taking the proceeds and using them to to purchase two properties, both in Brooklyn as well.

Shoot me a message if you want to talk - happy to point you towards the mortgage broker we've used with great success in the NY area or just give you a bit more detail on the trials and tribulations we've faced in Brooklyn which is a vastly different REI market than most of the country, at least as far as I've found.

 Agree with all of the above.  Beyond that, for all of our properties where we carry a landlord policy, the insurance company requires that our leases have terms mandating tenants have renters insurance.  That said, there's no validation of it (eg; we don't require proof of renters insurance, and our insurance company doesn't require any proof from us/our tenants), but the clause is there in the lease should it ever come up.