All Forum Posts by: Scott Schreiber

@Marc Knapp, I'm closing on my first investment property next week, a mixed-use in Yonkers. What areas of Westchester are you looking in primarily? In addition to Yonkers (which I think is about 10-15 years away from really exploding in value, but the signs are there now), I've had my eye on Peekskill, and Port Chester, which is closer to your neck of the woods. Taxes can make cash-flow difficult, but if you're willing to be adventurous and invest in low-income areas, there are deals to be found. @John Hickey has provided a guiding light in that regard, as his posts on investing in Newburgh have been informative, to say the least. 

I'm also a real estate attorney in NY, so if you have any legal questions, etc., don't hesitate to ask. 

I have a few recommendations I can make. What areas of Westchester? I know a few people who specialize in certain areas. 

1.  We are renting it at market and that covers the mortgage and maintenance. We had an assessment in place for about a year to cover major rennovations to the building which have resulted in appreciation.

Exactly....the problematic assessments. That being the case, you're relying on appreciation. There are no guarantees, but on the UWS of Manhattan, there's a pretty good chance that the value will keep going up.

2. We could do improvements, but I am not sure whether the increase in rent would justify it. Our neighbor gut rennovated her unit and she rents her place out for the same amount we rent ours.

In that case, I think it's safe to say your cash flow problems aren't going to be fixed any time soon.

3. Liberal sublet policy meaning we can rent out the place for as long as we like without restriction as long as its not a short term rental i.e. airbnb. This is unlikely to change as the sponsor owner % is high.

Has the sponsor been selling any shares lately? Without knowing the exact details of your specific co-op, I'll just say that you never know when a sponsor might want to sell some, most, all of their shares. Connected with my hatred of assessments as they pertain to investment properties is my belief that no matter what, you're putting your investment into someone else's hands when you own a co-op or condo.

5. Depending on the area, instead of owning one coop we could buy anywhere from a duplex to a fourplex in California if we invested all of the money from the sale.

I'm partial to spreading your costs and risk among as many potential tenants as possible. Therefore, if you could get a fourplex in California with higher cash flow, that would be my vote. Not only would you have more control, but one vacancy isn't 100% of your income gone.

6. We don't need the cash flow now but ideally we would like a place that cashflows and appreciates. One thing thats attractive about owning a property in California is that we are not obligated to pay maintenance to a coop which eats from the cashflow, however, that said we realize there will be maintenance expenses associated with owning any property.

While there will be maintenance costs, they'll be a lot more under your control, and, as I said above, you can distribute them among more tenants. Again, though, if you're playing the appreciation game, I'm the wrong one to ask. I can make guesses about what the markets are going to do, but others are far more qualified than I am. I don't think NYC is going anywhere, but you just never know.

8. Coop does not have a flip tax.

For now. 

9. Can you elaborate on your philosophy of never selling. Would you sell to buy something bigger? We could do a cash-out finance in a few years to buy another MF

I guess I mis-spoke when I said never sell. I just mean that there are far too many instances I've heard of where people sold because they thought their property was going to be worth less later than it is now, and they ended up missing out on a lot of money. If you hold anything long enough, the odds are that it's going to increase in value (I know, this goes against my entire non-appreciation advice). I would sell to buy something bigger if there was no way I could do both. If you could find a value-add property in California, BRRRR, and buy another property, etc., I think that's an excellent strategy, as do many on this forum.

Again, anything I can do to help, please let me know! Or if you'd like to talk privately, my offer is still open.

Hi Sherry,

I'll try to help with your question, as I am both an interested investor-hopeful who has done a lot of research, a real estate attorney in NYC, and a resident of the UWS of NYC. That being said, I'm sure there are many others on the boards who can provide a lot more insight.

Let me also preface by saying nothing contained herein should be construed as legal advice. I do not represent you, nor are you my client (sorry, I have to say that). Also, everyone has to make the decisions that work best for them, but here are some things to consider when making your decision:

1. Are you renting it at, below, or above market? If below, and you could raise it to market, what would your cash flow look like?

2. Could you do any improvements that would allow you to rent it out for more? 

3. When you say liberal sublet policy, what do you mean? Also, keep in mind that a new Board could take charge of the building and get rid of the liberal sublet policy. I have no idea whether that's a likely event, but just something for you to keep in mind.

4. I'm not a tax expert, so I don't know about the capital gains tax issue (though I'd be happy to try to put you in touch with someone who would know, although that would likely cost you). However, do you know about 1031 exchanges? If not, the general idea is, if you sell an "investment" property and buy another investment property with the proceeds, you don't pay tax on the proceeds. So even if you don't sell by August 2018, you could still avoid paying tax on the sale via a 1031 exchange (if it's still around by then). As I said, this isn't legal advice, though. 

5. For the amount you're expecting on getting, what can you get in California?

6. What's your "why"? Why are you investing? Cash flow now? Appreciation later? 

7.When considering your ROI in selling your co-op, also keep in mind that in NYC, you, as seller, will likely have to pay NYC and NYS transfer tax (buyer would likely pay "Mansion Tax" if the sale price is $1M, but everything is negotiable).

8. In addition to transfer taxes, your co-op may also institute a flip tax, either on the buyer, the seller, or both. Something else to keep in mind in your sale.

9. Depending on how much equity you have in the property, and assuming you could raise the rent to help your cash-flow problem, might be worth considering a cash-out refinance and taking that money to invest in a MF in California, if that's your ultimate goal. My philosophy is to never sell anything. 

I don't mean to solicit on the forums, but if you'd like to discuss more, I can provide you with my phone number and work email. Just send me a PM and I'd be happy to help more in any way I can. 

Good luck!

EDIT: A few of the other answers were given while I was typing this out, so please excuse any repeat information.

Hi all,

First off, I want to apologize to @Account Closed for missing last night's meet-up. I really wanted to partake, but unfortunately got held up. 

I am working on a deal right now in Mt. Vernon for a 6-unit property. Most of the units are occupied by Section 8 tenants. The issue is that the rent for all of them is well below Section 8's Fair Market Rate for 2017. For instance, the 3brs are renting for anywhere from $1400 to $1800, but the 2017 FMR in Westchester for a 3br is ~$2,197. However, since it's a 6-unit, it's also subject to the ETPA, which means I wouldn't be able to raise the rent at all for 2017, and a vacancy lease would only allow me to go up a max of 20%.

So my question is, does one rule (either Section 8's FMR or the ETPA's max rent increase) trump the other? Or should I basically be figuring that these are the rents I'll be able to collect from here on out?

Secondly, the owner of the property lives in one of the units and is interested in leasing back their apartment. I have no objection to this, but does anyone have any input on how the rent stabilization laws would affect this? I would also love to allow the owner to live rent-free for a number of years, either by decreasing my purchase price or putting a set amount of money into escrow and deducting from it every month. Would either of these be more or less beneficial when the owner moves out in terms of setting a rent that complies with the ETPA?

Thank you all for your input! I look forward to hearing everyone's opinions.

I live in Manhattan and haven't bought my first property yet, so take my input with a grain of salt. That being said, I've also been looking at multifamilies in Poughkeepsie, and want to share with you some of the things I've found.

Pros:

-2(.5?) colleges in town, Vassar and Marist (and Culinary Institute?). They're likely not going anywhere.

-Medical Center is undergoing a huge renovation, doubling in size, and it is supposed to be the biggest medical center when complete between Albany and Westchester. This brings in jobs at all income levels, which is what I liked about it. Additionally, I remember in one of the BP podcasts, they talked about renting out some of their properties for construction workers for a few years, which might be a nice short-term option until the project is complete.

-Like you said, better cap rates, at least on paper.

Cons:

-I remember reading about IBM shutting down, which probably meant the loss of a lot of jobs.

-I don't think you'll likely see any appreciation, though like me, it doesn't seem like that's what you're interested in.

-I've heard it's block-by-block, and that there are definitely areas you want to stay away from.

-Probably too far to get commuters from either NYC or Albany.

-I'm sure there are a lot more, but like I said, I don't live up there, I don't have any property up there, this is just the preliminary findings I could gather.

Hi Francine, I want to share with you what I recently posted in response to someone else who was looking for a real estate attorney:

Let me provide a disclaimer by first telling you that I'm a real estate attorney in NYC, and my firm does a lot of work in both residential and commercial, as well as for both owners and investors. That being said, I think there are a few things you should look out for when picking an attorney (I don't know so much about CPAs, but I'm assuming you'd want similar qualities).

1a. Regular and thorough communication. No matter how good of a lawyer someone is, no matter what results they can get for you, if they don't provide good communication, you're going to constantly be worried about your deal. Is it going well? Is it going poorly? Why isn't my attorney responding to my calls/emails? Regular communication, to me, is the most important quality (along with 1b) a good attorney can provide.

1b. Honesty. A lot of an attorney's job involves aspects that require the utmost level of honesty. Whether it's handling your personal/business bank account information, having access to your funds, knowing your social security number, or just having to deliver bad news, you want someone to be honest. I think this is actually tied with number 1, which is why I marked it 1b.

2. Personal relationship. As I mentioned above, your attorney has a lot of personal access, and it's someone you need to be able to trust. There's a reason we're called counselors, and it's because our job is to provide counsel. It's helpful to look for an attorney who has a high level of empathy, who can put themselves in your shoes, knows exactly what you're going to be worried about before you're worried about it, and counsels you on how to proceed. This ties into good communication.

3. Experience. You want someone who's done this before. In every transaction, there's always something that comes up that's slightly different than the last. So when I say experience, I don't necessarily mean someone who's done your exact deal before, I mean someone who's experienced in dealing with those wrinkles that inevitably pop up. You also want someone who knows what they don't know, but can find the answer thoroughly and efficiently.

4. Price. I put price last because (again, I'm biased) I think that whatever extra you pay a good, highly reputable attorney is going to be worthwhile in the end. Sure, you could hire a cheap attorney who graduated last in their class (still called lawyer!), but you're going to get what you pay for.

If you have any questions or anything I can help you with, please don't hesitate to reach out!

Hi @Shanel Wiggins,

Let me provide a disclaimer by first telling you that I'm a real estate attorney, and my firm does a lot of work in both residential and commercial, as well as for both owners and investors. That being said, I think there are a few things you should look out for when picking an attorney (I don't know so much about CPAs, but I'm assuming you'd want similar qualities).

1a. Regular and thorough communication. No matter how good of a lawyer someone is, no matter what results they can get for you, if they don't provide good communication, you're going to constantly be worried about your deal. Is it going well? Is it going poorly? Why isn't my attorney responding to my calls/emails? Regular communication, to me, is the most important quality (along with 1b) a good attorney can provide.

1b. Honesty. A lot of an attorney's job involves aspects that require the utmost level of honesty. Whether it's handling your personal/business bank account information, having access to your funds, knowing your social security number, or just having to deliver bad news, you want someone to be honest.  I think this is actually tied with number 1, which is why I marked it 1b.

2. Personal relationship. As I mentioned above, your attorney has a lot of personal access, and it's someone you need to be able to trust. There's a reason we're called counselors, and it's because our job is to provide counsel. It's helpful to look for an attorney who has a high level of empathy, who can put themselves in your shoes, knows exactly what you're going to be worried about before you're worried about it, and counsels you on how to proceed. This ties into good communication.

3. Experience. You want someone who's done this before. In every transaction, there's always something that comes up that's slightly different than the last. So when I say experience, I don't necessarily mean someone who's done your exact deal before, I mean someone who's experienced in dealing with those wrinkles that inevitably pop up. You also want someone who knows what they don't know, but can find the answer thoroughly and efficiently. 

4. Price. I put price last because (again, I'm biased) I think that whatever extra you pay a good, highly reputable attorney is going to be worthwhile in the end. Sure, you could hire a cheap attorney who graduated last in their class (still called lawyer!), but you're going to get what you pay for. 

If you have any questions or anything I can help you with, please don't hesitate to reach out!

In addition, I've been looking at 3-4 unit investments in the Lower Westchester area for a few months now. My wife grew up in Westchester, and we plan to move there in the next few years. Which areas are you looking at specifically? My search usually includes Yonkers, Mt. Vernon, New Rochelle, and White Plains. I've put in a few offers, but so far nothing's panned out. It'll happen. 

@Account Closed Wow!!!! That is such awesome advice! I never would've thought of that, and am definitely going to try it out.

Thank you @Account Closed for your excellent advice! I learned a lot just from reading through this thread. Like many on here, I'm in NYC, and can't get started in the city. I'm a member of the NY Bar, and got my Broker's license. In a few weeks, I'll be starting a position at a residential and commercial real estate law firm, and am hoping to learn a lot about the process that way.  

I have a few questions. I'd like to stay within 2-3 hours of the city, and have been looking at places like Poughkeepsie, Peekskill, and Hudson. Do you have any experience with these places? Any advice on whether those markets are good for BRRRR, fix and flip, or something else? My ultimate goal is to build up monthly income of at least $10,000/mo in the next 10 years.

Secondly, what tools do you use to analyze what you think you can rent out a place for? I've used Zilpy and Rentometer, but it's hard to know how accurate they are. 

Again, thank you for your time and advice! This thread is awesome.