How to start investing in NYC?

Question

Hi , I am new to BP. I have decided to start real-state investing. I have done lots of research, listed to every possible podcast, BP was the most clear, without much fluff. I want to start in investing in residential properties 2-4 apartments for rental income. May be house flipping in the future but as starting point. I would like to stay local. Brooklyn, Queens.  The problem is its really hard to purchase anything in the NY. Even foreclosures are very expensive, I am looking at the neighborhoods with "lower prices" bed sty, williamsburg, sunset park,some areas in queesns like far rockaway that depreciated a lot after Sandy. Does anyone have any experience finding "bargains" in NYC that are not in the war zone? How risky is it to deal with foreclosures? Any tips or  recommendations would be greatly appreciated.

Ceasar Rosas · Answer

Hi Marina,

I've been a realtor in NY for the past few years. Unless you have cash or access to it by having partners, the best way to get a deal will be through an FHA or FHA 203k. I used an FHA loan for my 2 family home in the Bronx. I currently househack there. You can only have 1 FHA loan at a time, if you've used this option before I believe you have to wait at least 2 years to use it again. Conventional would be better if you have a bigger down payment, but if you have limited funds you can't beat 3.5% Down, unless you are prior military and can get a VA loan at 0% Down.

I've also partnered up with others and have had a good experience investing in Pa, lower cost to start.

Joshua D. · Answer

Jane... How does one make a profit from an abandoned place by flipping before renovation?  Is it just because the time passed and the value of the building and land went up?

thanks.

Bernard Klein · Answer

Hey Marina,

Investing in NYC can be incredibly challenging, particularly when dealing with limited cash reserves. However, as the saying goes, don't attempt to boil the ocean. There are deals to be had both big and small. It is possible for you to chase a smaller deal, which will require much less money down. Once you get one of these deals under your belt, you will have more cash on hand for the next deal.

My first deal was a studio in the FiDi which I held onto for a few years before selling it at about $200K profit. Another deal happened in Battery Park City, where we held for 2.5 years before reaping in $500K profit. All of these deals required calculated risk and the majority of cash reserves we had on hand, but they set us up for success.

Right now, I'm pursuing opportunities in neighborhoods like Bushwick. It may be tempting to get into the multi-family market, but a smaller condo purchase may be just what you need to get started.

Jane's advice is also really good. Never underestimate a simple stroll or bike ride through neighborhoods. You never know where opportunity is knocking.

Jane W. · Answer

Yes, there are bargains in NYC but they are not in searchable in database or on the MLS. You can look through the Lis Pendens with properties that are potentially distressed and have not been through the foreclosure process (where it can draw a lot attention from investors).

Also you can also walk or bike the neighborhood, where you may see buildings that are boarded up and left in disrepair. Those could be great properties to buy if you are up for the due diligence (usually those properties could have long standing issues) and can pay for the renovation.

I've seen a building in BedStuy (that sat empty for 20 years) was bought for $600,000 and being flipped for $1,500,000 with no renovation. It does happen. Though if you need a conventional mortgage, banks may not be willing to lend on a building in terrible shape, so you may need to find short term financing options. There's a lot of risk and a lot of reward.

_Jane Wang, jwang@25realty.com

Marina Weinstein · Answer

Isn't FHA loan for 1 st time home buyers only? It is not financing I am worried about, its the base price. When small 2 family houses run for over 500K, quads  for over 1M its becomes hard to make it profitable. I am looking for creative, but legal ways to find something in the lower price bracket.