All Forum Posts by: Alexander Szikla

This is like a $5k job - vendor is ripping you off!

They are areas poised to grow EXCEPT both are notoriously tough with rent control. Although a 2 unit would not be subject to rent control, it "stiffles" the entire market.

More of an appreciation play than a yield play. 

@Cristiano Bell as you may know cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx. 

6% in Manhattan is an incredible deal! Although rental increases are tough (the destabilization game has been played out and beat to death) never has there been a time in recent memory when you can actually cover debt and cash flow in Manhattan. 

Today nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise.

Long term, I think NYC will come back as it always has time and time again. I am also a great believer in investing when there is distress and deploying capital when you can.

If you are looking for yield in the short run, Manhattan may not be for you. However, it is certainly the most attractive it has been in years from a cash flow perspective. If you are seeking out asset accumulation and equity appreciation over the long term then there are certainly fortunes to be made.

If these mentors/gurus were truly that good at what they do, they likely wouldn't be mentoring. There are certainly qualified folks who enjoy giving back and may want to be compensated, but that is the exception, not the rule. Tread carefully.

@Taylor Yasui

I am not a Sec 8 landlord, but I can answer your questions. If you are selective with your tenants (i.e. references, background checks, credit checks) you can get some really high quality tenancy backed by the government via Sec 8.

Usually, Sec 8 tenancy turnover is LOW! The high quality tenants know the value of the vouchers and "shop around" until they find a great place, they know they are in demand. But once they find that great place, they want to stay put. Quality attracts quality. 

Although HUD publishes rates, you should call the individual housing authorities to get a better idea. Moreover, they have very specific methodology on how they adjust up or down from the base rates (i.e. heat being gas or electric for example).

The most value for Sec 8 is probably created in the 3-4 family space. Good synergies on tax and insurance without the requirements of serious management infrastructure!

@Wendell Butler I'd jump for the Triplex. You will get greater efficiencies on insurance, taxes, etc. If you can cover the mortgage by a healthy margin - I wouldn't sweat it.

Alexander J. Szikla,

Licensed  Real Estate Salesperson in New York (#10401326358)

The deal pencils out well financially speaking, but practically two things that you need to watch out for a 203k/Contractor difficulties and tenant turnover. These should not prohibit you from moving forward, but 203k can be a nightmare to deal with and contractors are not very "patient" when waiting on money. 

Tenants are also unlikely to leave easily. Did you budget for some buyouts? If they don't leave, you'll need to evict which will be a long, costly process (especially with COVID).

@Tom Wagner - Good stuff! Now you should wait a year, refinance via a commercial loan (higher rate and 75% LTV but housed in an LLC and separate from you). I suspect it will appraise for $1.75 mm letting you get most of your equity out.

Then consider redeploying via another FHA. I'd recommend looking into areas that are currently "on sale" and are poised to let you create a lot of equity in coming years in New York City.

Either leases or estoppels are a must before you go any further. Any competent lawyer would tell you that too which concerns me. 

The leases / estoppels should not only spell out rent amounts but also who is responsible for what (i.e. insurance) and what sort of items (i.e. appliances) came with the property. 

If you are renting them, I would not replace hardwood with new hardwood. That is very expensive and tenants will certainly wear it down. They seem that they can be sanded and stained and will look great. If they can't, I'd probably put wood look vinyl over them to protect the hardwood.