House Hacking a Multifamily in Brooklyn? Possible to break even?

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House Hacking a Multifamily in Brooklyn? Possible to break even?

Chad Eatinger
Brooklyn, NY · Member since 2015 · 20 posts · 8 votes

Hi everyone,

I am going to be moving to New York with my family next year for grad school, targeting to live in Brooklyn/Queens, and hopefully within a reasonable commute distance (30-45 mins public transit) to Manhattan. 

 My goal is to find a 2-4 unit multifamily to house hack, preferably one that needs quite a bit of work so I can build in some sweat equity and get rents to cover at least my living expenses. If can eek out some positive cash flow while I'm there that would be amazing but I think a bit unreasonable. 

Any thoughts on:

  • which neighborhoods here present a good value for house-hacking?
  • considering I'm planning on living there with kids, which are areas to avoid regardless of whether there is a good deal?
  • any area-specific information I should be aware of when running calculations (inclusion/exclusion of certain utilities in rent, special tax considerations, rent control issues, etc?

Lastly, any real estate agents, wholesalers, or bird dogs who'd be interested in connecting on this I'd love to chat with you. I know it's a ways off but I have a feeling it'll take me some time to try and find a good deal in the area, so any help/connections I can find would be HUGELY appreciated. Thanks in advance! 

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Amit Kal
Investor · Sunnyside, Queens, NY · Member since 2015 · 213 posts · 159 votes
8y

Here's a six family that sold recently in a pretty good neighborhood in Queens

http://www.welcomehomerealestate.biz/index.cfm?pag...

As I understand it, this property closed for $1.55M. While the overall annual rent roll right now is low $58k, I would imagine you could easily increase NOI by 50% or more over a period of 3-5 years if you were diligent about turning over the units. Getting tenants out in NYC is NO SMALL task, since the building is rent regulated. BUT, making deals with tenants to turnover units is the REAL sweat equity here in NYC. The purchase strategy would need to include those costs (i.e. $50k per unit to buy-out and rehab each unit).

In 2011 I purchased a 6 family building in a slightly better location for $850k, the annual rent roll was $82k. Now, the annual rent roll is $108k, a 30% increase and one of the units is occupied by my mom who pays NO rent.

NYC is a long game.  

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  • Paul LaSpina
    Specialist · Manhattan, NY · Member since 2014 · 85 posts · 12 votes
    8y
    How much you plan on investing? You’d need about $2000000
    1Reply
  • Jason LeePro Member
    Real Estate Agent · New York, NY · Member since 2015 · 401 posts · 235 votes
    8y

    What's your budget and how old will your kids be? Your budget is going to determine a lot of what's possible. Next, you have to figure out schooling for your kids, which in NYC isn't going to be so simple. I'd try to figure out those things first.

    2Reply
  • David Weintraub
    Lender · Berkeley, CA · Member since 2017 · 1k+ posts · 549 votes
    8y
    Tough sledding. Will your kids be in school? Forget Brooklyn unless you’re paying for private, or have the $2MM. Bayonne and Union City maybe?
    1Reply
  • Chad Eatinger
    OP
    Brooklyn, NY · Member since 2015 · 20 posts · 8 votes
    8y
    So not $2M, probably closer to $1M or a tiny bit over, though I’m looking more for off-market or foreclosure/reo/short sale to keep the purchase price down as low as possible. As for schools, my kids are now nearly 2 and 3 years old, so I’m not terribly worried about schools just yet. I’m planning on living there for two years while I fix it up and rent it out, and hope to move out and fully rent it after I graduate (2 year program) which is when I’ll really need to start worrying about school. Hope that helps and thanks in advance for the feedback.
    2Reply
  • Sebb Fusco
    Member since 2018 · 2 posts · 0 votes
    8y
    You can find something like your looking for in many neighborhoods. Consider Crown Heights , Midwood , prospect Lefferts gardens .
    0Reply
  • Nick Hakim
    Analyst · New York, NY · Member since 2015 · 81 posts · 51 votes
    8y

    The five boroughs are going to be extremely difficult with that budget and timeline. Deals like that are few and far between. You'll also need to budget a good amount of cash for renovations. 

    I would highly recommend looking in NJ in areas just outside of the city and along transit lines like Rutherford, Montclair, Garfield, etc. These areas and BK are equidistant from Manhattan, but the price points in NJ are less than half.

    1Reply
  • George-Hyuung W.
    Specialist · New York, NY (newyork) · Member since 2016 · 13 posts · 5 votes
    8y
    Chad Eatinger I currently rent with my girlfriend, in Ridgewood, Queens. We recently moved from BK. We are both very familiar with the market you’re planning to move to, taking into consideration areas that would be a good choice for the kids. There are deals that fit your budget and timeline, though the location may be “deep” Queens or BK.. or areas of BK that are closer to Staten Island. Feel free to message me to discuss further, navigating the outer boroughs can be tricky at first!! George
    0Reply
  • Sebb Fusco
    Member since 2018 · 2 posts · 0 votes
    8y
    Sorry Nick nobody wants to move to New Jersey it’s just not a cool place and it’s boring and filled with Factories that pollute . Different class of people .
    0Reply
  • Chad Eatinger
    OP
    Brooklyn, NY · Member since 2015 · 20 posts · 8 votes
    8y

    @Nick Hakim - yeah I'm aiming for off-market properties or foreclosures/REO properties to get in on the cheap where possible. I'll definitely take a look at NJ as well, but for some reason the missus seems to prefer BK/Queens to NJ.

    @George-Hyuung W. - by "deep" Queens or BK, how long of a commute into Manhattan would those be? I'll definitely reach out as I'm eager to learn as much about my future stomping grounds as possible.

    @everyone else - Any other area-specific things I should keep in mind when analyzing deals/properties? Any wholesalers interested in sending multifamilies that meet my criteria I'm definitely open to hearing about them. 

    0Reply
  • Fradel Schaechter
    lakewood, NJ · Member since 2017 · 282 posts · 156 votes
    8y

    @Sebb Fusco were you being sarcastic about that? NJ is not as cool as NY but the prices can be a whole lot cooler depending on location :)

    I would say that the factories are in some commercial neighborhoods, but where I live the air is fresh and no factories in sight.

    @Chad Eatinger wishing you the best of luck in finding that multi-family deal!

    0Reply
  • Aric W.
    Rental Property Investor · MD (maryland) · Member since 2015 · 25 posts · 23 votes
    8y

    Look into Jackson Heights Queens, 25 min into midtown. 2 families around 850-1.1 

    3 families 1.3 and up. Jackson Heights has 5 train lines, great food,and your close to Astoria for night life,plus very family friendly. PM me is you have any other questions. 

    2Reply
  • David Weintraub
    Lender · Berkeley, CA · Member since 2017 · 1k+ posts · 549 votes
    8y

    @Chad Eatinger "Cool?"  Dude has two kids.  Cool is not a huge factor.

    I lived in SF for two years and Oakland for 5.  Bay Area is the greatest, but it's impossible for many reasons.  

    4 Boroughs of NYC are awesome, and Jersey City.  Other than Oakland, JC was my favorite place to live.  I've been in CA, Miami, Ohio, NYC, NJ, and now Philly.  You'd love JC, but it's also a tough place to find properties.  

    I'd look in Harlem.  Not all of it, but a good portion of it.  I can connect you with NYC Realtors who can just give you some info. Feel free to call me whenever.  

    0Reply
  • Marcy Moyer
    Realtor · Mountain View, CA · Member since 2017 · 120 posts · 108 votes
    8y

    I have looked into buying in Tarrytown and surrounding areas in Westchester County. Easy access to the city but a lovely suburb.  My son lives in Brooklyn. He told me there are all kinds of plans and politics about closing certain subway lines which will make some areas of Brooklyn worth more and some less. We gave up on trying to buy in Brooklyn where he lives. Anyway, be sure and check out the planned subway line closings in the next few years before buying.

    0Reply
  • Colin B.
    Rental Property Investor · Astoria, NY · Member since 2011 · 16 posts · 11 votes
    8y

    @Chad Eatinger it is possible with your budget but it really does depend on the neighborhood in Brooklyn or Queens. I think your strategy of buying and renovating is the way to go (and maybe the only way to go) if your goal is have your tenants cover the mortgage and expenses. Cap rates are low in NYC so you should be focusing on three and four unit buildings to ensure that your tenants cover your costs (my tenants in my two unit in Astoria do not cover all of my expenses), which will be more difficult. For specific neighborhoods in Queens that are close to Manhattan and that may be within your budget based on my recent intel, consider (in addition to Jackson Heights), Woodside and maybe Sunnyside. I suspect with your budget that it may be very difficult (though maybe not impossible) to find a building in Astoria or Long Island City.

    I'm not as well versed in Brooklyn but to Marcy's point, the L train is supposed to be shutting down in Manhattan for repairs for 18 months starting in (I believe) 2019. This will make the commute from the Brooklyn neighborhoods of Williamsburg and Bushwick, which are on the L line, more difficult. Like many investors, I'm curious as to how this will affect the various real estate markets and have my own theories. 

    Specific blocks matter, maybe more than in other markets, so you really should plan on a heavy boots on the ground analysis. For example, there are blocks in Astoria, considered by many to be one of the best Queens neighborhoods (I'm of course biased but agree with that perspective), that I wouldn't live in and others where I avoid walking. 

    As you're looking online before visiting, try to get a sense of pricing in a particular neighborhood as it relates to proximity to subway stops and specific subway lines, above-ground subways and parks. Though there are always exceptions, you'll generally find that there are more stores and restaurants closer to subway stops. 

    Finally, if you're looking off market or for a foreclosure, etc., you should be ready for a lot of competition in NYC  (especially if you're looking for a deal) so get ready to hustle. 

    Feel free to message me if I can be useful...good luck.

    2Reply
  • Amit Kal
    Investor · Sunnyside, Queens, NY · Member since 2015 · 213 posts · 159 votes
    8y

    Here's a six family that sold recently in a pretty good neighborhood in Queens

    http://www.welcomehomerealestate.biz/index.cfm?pag...

    As I understand it, this property closed for $1.55M. While the overall annual rent roll right now is low $58k, I would imagine you could easily increase NOI by 50% or more over a period of 3-5 years if you were diligent about turning over the units. Getting tenants out in NYC is NO SMALL task, since the building is rent regulated. BUT, making deals with tenants to turnover units is the REAL sweat equity here in NYC. The purchase strategy would need to include those costs (i.e. $50k per unit to buy-out and rehab each unit).

    In 2011 I purchased a 6 family building in a slightly better location for $850k, the annual rent roll was $82k. Now, the annual rent roll is $108k, a 30% increase and one of the units is occupied by my mom who pays NO rent.

    NYC is a long game.  

    3Reply
  • David Weintraub
    Lender · Berkeley, CA · Member since 2017 · 1k+ posts · 549 votes
    8y
    Originally posted by @Marcy Moyer:

    I have looked into buying in Tarrytown and surrounding areas in Westchester County. Easy access to the city but a lovely suburb.  My son lives in Brooklyn. He told me there are all kinds of plans and politics about closing certain subway lines which will make some areas of Brooklyn worth more and some less. We gave up on trying to buy in Brooklyn where he lives. Anyway, be sure and check out the planned subway line closings in the next few years before buying.

     I was just in Tarrytown yesterday with my cousin who is from Saratoga.  Coincidence! 

    Tarrytown is easy into the city, and has a lot of homes for great value.  It's very walkable, easy to the train, beautiful views of Hudson/Tappan Zee, and has a number of parks.  

    0Reply
  • David Weintraub
    Lender · Berkeley, CA · Member since 2017 · 1k+ posts · 549 votes
    8y

    BTW, the L-Train shutdown will definitely affect commuters, but it won't change rents/property values, imo because it will open again, and be BETTER.  People were buying at 96th St and 2nd the day the first article hit the newspaper about a new subway line.  As mentioned prior by @Amit Kal, NYC is a LONG game. 

    And commuters in NY adapt quickly.  

    1Reply
  • Matt S.
    Rental Property Investor · Brooklyn, NY · Member since 2017 · 67 posts · 29 votes
    8y

    Lots of good responses here. I've lived in Brooklyn for the past 7 years, so I can speak to some areas. With a $1MM dollar budget, you're going to be hard-pressed to find anything more than 1bd (or small 2bd) in Williamsburg, Greenpoint, Dumbo, Brooklyn Heights, Cobble Hill, Fort Greene, Boerum Hill and Park Slope. So you'll need to go outside of those prime areas. This means a significantly longer commute to Manhattan. Where is grad school? If lower Manhattan, south Brooklyn may work. If upper Manhattan (i.e. Columbia), you're looking at an hour and a half. You can find multis further south of prospect park for less than a $1mm. Sunset Park and Bay Ridge are good areas. The further east you go from there, the cheaper places get.

    I guess the question is: do you want to spend your two years on the outskirts of NYC or in NJ, potentially in questionable neighborhoods, with long commutes just to have an investment there? It might be worth investing in cash flow properties in other cities and using the proceeds to subsidize your rent in a convenient NYC neighborhood. 

    1Reply
  • Vaughn Smith
    Property Manager · NJ · Member since 2017 · 786 posts · 396 votes
    8y

    @Chad Eatinger what you're in search of is tough to find even tougher given your preferred proximity to manhattan. Keep in mind also that if you find an off market property in New York the labor and material costs can chew right through your budget. Have you given NJ any consideration?

    0Reply
  • Abel CurielBusiness Member
    Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    Good evening @Chad Eatinger,

    Great post... Sounds like you're getting your plan in motion. What will you be studying in grad school?

    House-hacking is a great strategy. Whether or not you'll be able to break even will depend on the # of units, down payment amount, location, and of course... the DEAL! 

    Taxes, market rents, and rent control issues also vary... Taxes for 2-4 units in Brooklyn & Queens range from $2,000-$20,000/year... Closer to $4,000-5,000 on average. 

    Market rents (for 2-3 bedroom apartments) range from $1,400-$3,000 on average... Wide range, I know... but this too depends largely on location.

    That being said, I'd be happy to be a resource for you moving forward. 

    Best of luck to you!

    Abel

    REbuild Team - eXp Realty5234 Reviews
    WebsiteView Page
    0Reply
  • Chad Eatinger
    OP
    Brooklyn, NY · Member since 2015 · 20 posts · 8 votes
    8y

    @Aric W. - I'm definitely looking into Jackson Heights, as well as Sunnyside and Woodside (thoughts on those areas, as well as East Elmhurst?)

    @David Weintraub - I'm definitely considering Jersey as well, so long as it's commutable. What about living in JC did you enjoy so much, as you're ranking it above some pretty nice cities to live in. Curious as to why?

    @Marcy Moyer - how is transportation to/from Tarrytown into the city? I've been reading some articles about the upcoming Brooklyn L line closure and was hoping that might put a temporary dent in housing prices but it doesn't seem to have had any effect as of yet. *crosses fingers*

    @Colin B. - yeah I've noticed that the boroughs are pretty similar to the SF Bay Area in terms of low cap rates and low rent/price ratios. I'm looking for something closer to 3-4 units so I can try to make the economics work. Thanks a ton for the tips, I'll definitely send a message.

    @Amit Kal - what is the going cost of cash for keys in the BK/Queens area? For the 6 family building you purchased, how did you end up financing it? Commercial loan? What sort of down payment was required for it?

    0Reply
  • Chad Eatinger
    OP
    Brooklyn, NY · Member since 2015 · 20 posts · 8 votes
    8y

    @Matt S. - Grad school is at NYU Stern next to Washington Square Park, so lower Manhattan. I've been looking mostly at Brooklyn and Queens for that reason, but I imagine cities in Jersey along the transit lines would be pretty convenient as well. It's a good point about investing elsewhere and using cashflow to cover living expenses. I imagine I'll be doing that as well, though after spending so much time in SF throwing money away on rent I want to try and avoid that from here on out, at least if I can.

    @Vaughn Smith - It's a good point on materials and labor. I would be working this particular multifamily myself for as much as I could to try and learn more about the contracting/rehabbing portion of the work, so hopefully that'll save me some $ there, but there is invariably types of work I won't be able to manage myself so I'll keep that in mind. Do you have any particular suggestions to NJ? I haven't looked into it in depth but I'm open to the idea.

    @Abel Curiel - I'm doing my MBA, planning to specialize in Finance and hopefully get into Finance after graduating. Thanks for the insight and I'l definitely reach out. I can use all the help I can get to get going!

    0Reply
  • David Weintraub
    Lender · Berkeley, CA · Member since 2017 · 1k+ posts · 549 votes
    8y

    @Chad Eatinger JC has amazing energy.  First off, for young kids it's great because there are parks, families, nurseries, you name it.  It's a very active community.  Often referred to as the "6th Borough".

    The food scene is outstanding.

    The Path train from JC has 4 locations.  Hoboken has one. 

    My favorite aspect was the community itself, in that there's literally every type of person, and most everyone gets along and is intertwined.  

    Finally, I was not a fan of being on the "other side" of New York because you have the other boroughs, long island, etc.  But New Jersey's side is easier to get places, like the beach, mountains, and just out of town, without having to cross through the city.

    Don't get confused though, as JC isn't cheap, but in a relative sense it is.  

    0Reply
  • Matt S.
    Rental Property Investor · Brooklyn, NY · Member since 2017 · 67 posts · 29 votes
    8y

    @Chad Eatinger Nice, I went to Stern for my MBA as well. You'll have a blast (and learn a little too). I hear what you're saying when you talk about throwing money away on rent. I used to think about it the same way and bought I bought an apartment in NYC as a result. I'm actually selling it now and renting elsewhere. In my mind, the key is net cash flow...as opposed to avoiding rent, but the appreciation potential in the NYC area is tough to beat.

    2Reply
  • Aric W.
    Rental Property Investor · MD (maryland) · Member since 2015 · 25 posts · 23 votes
    8y

    @Chad Eatinger Sunny side is a great area ,only 7 train though,and more expensive than JH. Woodside is another great area thats close to the city, prices around JH , I like JH in terms of neighborhood but Woodside would be a great long term investment,East Elmhurst has more homes and not to many apt buildings so it feels less crowded,but your father away from the trains,you do have lots of bus lines that you can take to Jackson heights train stations. East Elmhurst will meet your price range and have some nice housing stock but your on the other side of Northern Blvd,and its just a farther walk to the trains. One thing about East Elmhurst your right under LGA flight path and is a shock at first,get your ear plugs ready if you move there. 

     Jersey City ,Ridgewood Bk,some other good options. Good luck waiting for L train, I lived in Williamsburg BK for 13 years,and that hood is only going up. The schools are a little tricky on the North Side ,but if you go to the Lormier Stop in the burg they have a good elementary school ,but with your price range will be tough. Good luck!

    0Reply
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