All Forum Posts by: Nick Louie

Hi Frank - Thanks for your feedback. I do agree that I should consider NJ. I will check out your recommended neighborhoods for sure. 

Could you share more about your investments in NJ? Did you also do a house-hack with a multi-family in NJ? 

Do you have an agent you work with in NJ that understands house-hacking? 
 

Hi BPs Community,

I'm looking to house hack with FHA 3.5% in NYC. Obviously, with PMI, house hacking with 3.5% in Brooklyn or Queens most likely means I won't cash flow until I pay off 20% of the mortgage + move out into property #2. But there is one solution: house hacking in the mean streets of...the Bronx...

I'm considering an incredible property for $800k that has a 4 units. I could break even while living in 1 unit, then when I move out in year 2, I would cash flow like crazy. The property looks great and the commute to my job in Manhattan is incredibly convenient. The property is close to Fordham University near the Bronx, and I'd attract students to come rent. However, the only downside is the property is in....the Bronx. I mean, just looking at the property, it is essentially all caged out to protect the windows...

I'm just curious here: how bad/dangerous is the Bronx? Is it as horrible as my family and friends are telling me about? My family is acting like I'm considering purchasing a property in Afghanistan. I looked up the neighborhood (Fordham in the West Bronx), and the crime rate seems high, but not as high as the South Bronx, which is the most dangerous neighborhood. I've watched videos, and it seems like the Bronx is total anarchy. One stat said 1/31 people are victims of violent crimes in the area. I have a lovely wife that I'd like to protect. We would live in the property for at least 1 year per FHA rules.

I essentially grew up in Upstate New York, so never actually been to the Bronx. I'm going to walk the neighborhood next week during the day and evening. 

I plan on buying and holding this property for years to come. It seems like long-term appreciation in the neighborhood is unlikely due to the bad reputation. But the cash flow potential through rentals in year 2 can offer a 20% cash on cash ROI. The numbers are amazing.

Please share your thoughts on buying property in the Bronx, you're experience investing in the Bronx (if you have), how dangerous you think it is (or isn't), and your overall impressions of the real estate market there. Thanks. 

Hi Krista - thanks! I just read your post. I see in 2020, you were making around $4000 rent income from 4 bedrooms. Have you been doing an Airbnb? 

I was curious, what made you do the single family instead of a 2 or 3 family? 

@Gaetano Ciambriello

I think this might be the plan…Maybe I could go with a condo in NYC and build my portfolio upstate or in Florida, where I have family and know the neighborhoods.

Jason - Are MFH really that hard to find in the Port Orange/Daytona area? 

 haha I agree with this. I'd definitely make her pay her share if she insists on my buying a single-family over a multi-family. Allen should definitely assume the business will make $0. 

A.S. Minor - Happy wife, happy life. You won't read that in Brandon Turner's book though lol.  

Hi Jason, 

Thanks for your reply. I'm looking to buy in Brooklyn or Queens. I think what I learned is exclusivity arrangements are controversial to say the least. But I actually think if a buyer gets lucky enough to find an eager agent that is knowledge in how to achieve the buyer's goals, then an exclusivity agreement within a reasonable time frame (e.g., 3 months), is acceptable for me. 

When it comes to guaranteeing the buyer agent's commission, I find this arrangement more controversial. The buyer agents say they don't want to work for free. This is totally understandable. But unfortunately, the market dictates what's "customary." If other buyer agents in the same market are working on a contingency basis, then it's difficult for a competing agent to say they don't want to work for free. Otherwise, they'll get pushed out by the market. 

In my profession (law), personal injury lawyers tend to work on a pure contingency basis. It is not customary for a personal injury lawyer to request the client recover a certain threshold of fees if the lawyer loses the case. It's the lawyer's job to win the case and collect his fees from the defendant. With that said, of course, there are exceptions in the market where personal injury lawyers propose an alternative payment arrangement: it's a free market. 

My question was whether a buyer guaranteeing the buyer agent a commission of 2% is customary in my market. My conclusion is in New York State it is not. 

With that said, I do believe--and I have experienced--that when a buyer enters into exclusivity with a buyer's agent, the buyer's agent definitely is more inclined to invest more into the relationship. 

Hi BP community,

My name is Nick. I'm moving back to New York City for a job, and I'm intending on house-hacking by purchasing a 2-3 multifamily home. I'm a first time buyer. I listen to the BP podcast, and of course, I'm reading all of Brandon Tuner's books. I'm looking to house-hack in Brooklyn or Queens. Unfortunately, the Bronx would likely be out of the question (wife calls the shots).

So, over the last couple of weeks, I've been searching for property on Zillow and Realtor.com. I've been analyzing numbers using the BP calculator for Pro members. After running the numbers on dozens of properties, my conclusion is house-hacking in Brooklyn/Queens (or other expensive, major metropolitan cities), seems to be a very tall task.

Here are my thoughts on house-hacking in Brooklyn/Queens:

• - Price Range. The majority of 2-3 multi-families are $900k - $1.3m. In order to efficiently house-hack, it seems like a buyer would have to purchase a distressed property and rehab it with a FHA 203(k) to have a chance to land a $800k deal, which would produce acceptable cash flow and cash on cash return of interest numbers;
• - Mortgage Product. Typically, buyers who want to house hack use a FHA loan. But in NYC, FHA 3.5% down loans don't work well because the premium mortgage interest (PMI) is too high: e.g., $1,000,000 x 1.05% = $10,500 / 12 = $875 monthly + mortgage payment + all other expenses;
• - Down-Payment at least 20%. Therefore, if PMI ruins the cash flow, then that means a buyer would have to put 20%+ down. In other words, the buyer could just use a conventional loan instead of a FHA, so this FHA strategy doesn't work in NYC.
• - Home Type. It seems like only a 3 family + an additional dwelling unit (ADU) is the only possibility of cash flowing once you move out of the house hack. Otherwise, the numbers don't really work: the COC ROI is too low and the cash flow is negative.
• So, my conclusion is: I need to reconsider whether I want to pay 3.5% FHA or 20% conventional. Regardless of the mortgage product, to profitably house hack, I'd need to be prepared to purchase a semi-distressed 3 family + ADU property around the range of $800k - $850k. Then I would use a 203(k) to rehab it and get more equity in the property. I'll live in one unit and rent out the other 3 units, hopefully for $5,000/month+ rent for Year 1. Year 1 will definitely be negative cash flow/COC ROI numbers. I just gotta take that loss.
• In Year 2, I could refinance my property, get out of the FHA loan, then move onto investment property #2 with a new FHA loan. Once I move out of property #1, I can rent out all 4 units, and now I'll actually positively cash flow on the property. Then I repeat this process for property #2 and keep the ball rolling.
  
• Question to BP community: Is there anybody in the BP community that has successfully house-hacked in Brooklyn/Queens (or another major metropolitan city) that could share specific deal numbers?
• Please feel free to share your thoughts. Thanks.

Hi Jason, 

What type of house are your 3 rental properties? Single-families, duplex, triplex?