All Forum Posts by: William Rugen

Thanks for the advice, James.  Unfortunately it seems this is my only option for financing.  Conforming loans aren't an option due to my self employment income and current primary mortgage payment.  I've spoken to some friends and family but no luck with private money.  This is my first property and it's such a low price compared to my overall market that I'm having trouble finding a commercial loan.  It seems a high interest personal loan is the only option and yes, I was definitely considering a refi in 6-12 months after purchase. Thanks again for your thoughts.

I'm looking for some insight from experienced investors as to how you factor in short term debt service to your deal analysis?

I have the opportunity to wrap up a condo purchase with these terms:

• Purchase price 35,500 + 4500 in closing costs for an even 40,000 purchase price.
• 5k in costs to prepare condo for occupancy (flooring, paint, misc.)
• Personal Loan of 16,000 at 11.99%.  Three year amortization for a monthly debt payment of $531.36 ($6376.32 monthly)
• Anticipated Rent 1550 with a near 100% occupancy in our market.  
• Operating Expenses total $760 monthly (taxes, HOA, HOI). Heating, water and sewer maintained by complex.
• $790 NOI before debt service. 17.16% cap rate. Without debt service, it's roughly a 32% Cash on Cash Return
• Cash Flow After Debt Service $259/monthly = a 5.63% net cap rate / ROI

I have issues with the initial cash flow during the first three years until the loan is paid off.  Long term, it can be a tremendous investment but getting to that point is the "sticker shock" that's unsettling in my eyes.  At the end of the day, I'm putting up $31,000 of my hard earned cash to make 250 bucks a month for the first three years.  

I should also mention the condo could probably be sold for 80,000 once the repairs are completed and I await the REO's seasoning period (90 days). In my market, there aren't too many opportunities under 50,000.

My long term goals are to own a portfolio of income producing properties and the idea is for this condo to be the first property in that portfolio.  

With all that in mind, I'd love to get some thoughts from those of you out there who had similar scenarios early in their investing career.  Would it be better to flip this condo then apply what would be close to double my savings towards a better cash flowing property?  Or, because the long term outlook is so positive, do I just ride out the next three years?  

Thanks in advance for all of your thoughts

Understood.  I'm curious to know what the difference in occupancy rates between rooms like yours and private rentals.  NYC may very well be one of the best markets for AirBNB

Brady you may want to consult with an attorney on that.  As far as I understand it, a sublease means a lease between you as the tenant and the subtenant (which in your case is the AirBNB guest). 

Love the idea and enthusiasm, Brady.  Coming from someone who travels often and stays at a lot of AirBNBs domestically and internationally, I have to agree that the shared bathroom will hurt your marketability.  My girlfriend and I would personally never stay in a place where we don't have a private bathroom to ourselves.  I'm curious as to how you arrived at an anticipated 67% occupancy rate? 

There are good opportunities in Shirley depending on property taxes.  I would try to focus on the properties under 9,000 annually rather than the ones at 11k and up.  Some are assessed even lower than 9k as there seems to be quite a variation depending on the owners' last grievance (if any).  I'm heading out there this weekend with a client to focus on our next investment property and I'm always looking for deals myself.  

One word of advice from someone who lived through Sandy here on Long Island.  Even if you're not required to have flood insurance, it's definitely recommended depending on where you're house falls within the flood maps.  It took a hundred years for a storm like Sandy to occur but there's just no telling when the next one may hit.  There were many parts of south Shirley, Mastic and Mastic Beach that took a beating...  

There are a tremendous amount of investors making money on both buy-and-holds and flips in Wyandanch.  The proximity to Nassau and NYC compared to other affordable towns helps along with the LIRR station near the newly revitalized area.  Take a look at what other towns have become after their revitalizations near train stations (Rockville Center, Farmingdale, Patchogue).  Their gains have far outpaced the rest of the market.  This isn't to say you shouldn't focus on cash flow (which is quite easy in this market) but the long term outlook for this market is pretty strong.  

Sure 9% cap rate looks good on the surface.  How's the cash flow look?  

More importantly, how does the long term appreciation look?  

Much of my business is in central & eastern Suffolk and there are stark differences between each "eastern" town.  Are we talking Riverhead that's undergoing a sizable revitalization?  Or is it something on one of the forks?  Many of the other eastern Suffolk towns are more suburban/rural with very little industry.  The type of zoning is important for the commercial part.  Both the residential and commercial rents can vary substantially town to town.  

I've been a real estate agent for six years.  Now that I'm venturing into real estate investing, I've realized my state's licensing regulations are quite prohibitive for real estate investing.  In NY, I'm required to list my professional title AND company I work for on any "buy homes for cash" advertising.  I'm an associate broker and assistant office manager for a big franchise and I don't particularly want to involve my company in my personal advertising.  My suggestion would be to check with your state reqs on advertising as a licensed sales agent.  Most likely you'll need to tweak your advertising in some way so it will depend on what you're comfortable with... 

Terry, do you know if that lender lends in NY?