Hello Everybody. NYC allows you look up properties that have unpaid water bills as well as unpaid taxes.
Is it worth trying to contact owners of these properties and offer to buy them? For example, when a property owes 60K in taxes and 12K in unpaid water bills, would this qualify as somebody you would target to try and buy the house from them? Seems they are in need of some financial assistance. Just looking for some opportunities.
This could potentially be a sound strategy. It depends on what you want to do with the property. Are you thinking of flipping it, or buying and holding?
To begin with, 72K owing on a property is likely to indicate an owner who is in distress. This means that you might be able to get the owner to sell it to you below market value. You would offer to pay out the outstanding loan plus the tax/water debts. The distressed owner gets to walk away, and you get the property for less than it is worth. However, this is probably not possible if the owner has no equity in the property. It would pay for you to do your homework before approaching the owner and ascertaining how much equity is in the property.
So let's say you manage to get the property for below market value. Then what? If you want to flip it, how much could you sell it for? Does the expected profit adequately compensate you for your time and inconvenience?
If you want to hold it for cashflow, does the expected rental yield make the deal worthwhile? On BP, people talk about the 2% rule - investors should be targeting deals where gross monthly rent is around 2% of their all-in cost. Rental yields in NYC are generally low - will you realistically be hitting 2%? Could you achieve a better yield by investing elsewhere in the U.S.? For example, I am doing a deal now in the south-central region where I'm getting 3%; I know of other investors who are getting 2-3%.
Hope this helps.
Thank you for the advice Alex.
There are a few location in Brooklyn that are absolutely on fire. My brother in law is killing it with 300-400k profits on flips. We are not on speaking terms so I am doing my best to figure it out on my own (with the help of Bigger Pockets).
I am going to try and market with direct mailing to properties with X amount of Utility debt and see how that goes. I will probably post success or failure logs in future posts.
@James Ritter I think its a good strategy if you execute it well. I sent about 2000 of these letters before and did not receive a single call. I was doing specifically back property taxes. If I had it to do all over again I would probably bring on a few bird dogs to knock on doors and speak to these owners directly. Focusing on 200 houses instead of 2000.