Is it even worth it?

Question

Hello all,

To introduce myself, Im a 24 y/o working professional in NYC who grew up on Long Island.

Me and two of my friends who grew up together wanted to start either flipping or buying and renting properties in Long Island. We all bring something different to the table and I have very strong analytical, finance and accounting skills, while the other two are stronger with the handy work. Our combined annual income is ~200K

We have investors presentations lined up, but I wanted to go in with a property and what our plans are.

But I've been looking for the past two months and can't seem to find anything on LI/NYC, that seems reasonably priced. Everything that I've ran the numbers on a flip on has been extremely close margins, while looking to rent a property nothing is reasonable (ex. ive seen rent ~.5%-~1% of the purchase price). The purchase price is too high for rent. Everything is running extremely thin and we all discussed that we need to find something we SOME leeway, especially since this is our first project.

I just wanted to know in the area, is it worth it anymore? Is the market so saturated with investors/buyers that LI/NYC is no longer profitable for small investors, or have I been missing something?

Also something I've been looking at is buying properties in areas that are a two hour drive away, but we all work "9-5s" and will have no time to visit during the week, but again since this is our first project what is people's thoughts?

Thanks

Steve Vaughan · Answer

Welcome @Chris Conte.

It was worth it for me. I wasn't commuting to a cubical ANYMORE! I did mobiles, looked into self-storage, vacant commercial property and re-purposing old white elephants (old warehouses) or motels or toys r us's or any number of failed brick and mortar structures with motivated sellers. The best ones aren't advertised for sale. They are just ugly and sitting there.

If you are just kinda unhappy or just kinda want something more, it may not be 'worth it.' Got to hit the streets and find off-market deals. The MLS has been a non-starter for me for a long time. Good luck.

Mike Dymski · Answer

We have been reading post after post for the past two years from (1) members who are fed up with the market (2) members who are having a hard time starting in a hot market and (3) members who have highly appreciated properties but don't have an alternative investment option if they were to sell or exchange.

Deal flow is king in this market and you have to (1) put hundreds of deals through the funnel via marketing and networking or (2) you have to invest with someone who has it.

I made a decision two years ago to do more of the latter...to start heavily vetting passive opportunities with experienced sponsors who have mature deal flow pipelines (i.e. deep broker relationships, industry leaders, full time staff dedicated to deal flow, consistent off-market properties)...while still casually vetting direct owned opportunities. It took me about a year and a half to pivot, 100+ reviewed offerings, too many sponsor calls to count, and Podio to track my notes but I have been putting capital to work in 2018. I don't like investing into a hot market but idle cash is costly and I am mitigating risk with the right opportunities (good locations, value add, cash flowing, prudent debt).

We all have different opportunities. You gotta come up with a plan to generate deal flow...it's not easy or quick but others are doing it (while we sit here and post on BP).

Ian Ippolito · Answer

I think is very smart that you are questioning and aren't going to force the situation, simply to invest, and risk getting yourself into a bad situation if we end up having a bad downturn. Unfortunately there are many areas of the country where the prices have gone up so much in relation to rents, that it's very difficult to justify making an investment (when you could put the money somewhere else or even in a completely different class of investment). Here in Tampa, I used to be able to get net rental yields of 7-9% just a couple of years ago and now they have shriveled up to 5%. At that point, I can think of a lot better places to put my money (and with a lot less effort). You may have to consider moving outside of your immediate area, to find the right place. If you don't have the time to devote to commuting, then maybe you guys should rethink being active investors in direct real estate. Good luck.

Chris Conte · Answer

@Jim K. I do Invest my own money (mostly in weed stocks) but I am looking to make a investment that is not an equity product, where I have more control. I am not too interested in REITs as they are still on the open market.

Fundrise is something I have put some funds aside in, and am looking to get into yield street, but I am not an accredited investor.

I also do enjoy doing the work but would like to see some progress.

Jim K. · Answer

Mutual funds, man. Get some mutual funds. Put those "analytical" skills to work. Let your two grunt friends who aren't so good on the analytical according to you find their own way in life.

Is it even worth it?

Is it even worth it?

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