Possibly Jumped the Gun: NY Investment Property

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Possibly Jumped the Gun: NY Investment Property

Selena Williams
New York City, NY · Member since 2019 · 52 posts · 38 votes

Hello all. Newbie here, lol.

I currently own a co-op apartment in Manhattan and I’m looking to sell it and buy an investment property (multifamily home) in Brooklyn. I estimate after closing costs I will have about $150k. I put my place up for sell thinking with that type of down payment I could easily get at least a two family in this market but I really should have done my research.

I've seen people mention that investors are able to purchase with as little as 3% down but does that apply to a market like New York? The cheapest multifamilies I'm seeing that are turn key are $999k. Even if I put the whole $150k down I would still need a loan for more than $679k - what I researched the max is for an FHA loan.

Did I try this too soon? Should I wait until I have more equity in my place/paid off more of my loan so I have more to put down? I’d love to make the move now but if I end up paying a ton of fees that eat into my rental income or simply can’t do it that would suck. I already have two offers on my current place.🥺

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Alex Horelick
Real Estate Agent · Westchester County, NY · Member since 2017 · 73 posts · 48 votes
6y

Hi Selena,

You can certainly leverage that $150k to buy a rental in the NYC area that cash flows. FHA limits are different by each metropolitan area and type of property. You can get a 1-4 unit through FHA in NYC and the surrounding areas for 3.5% down however the standards are stricter for 3-4 units so the numbers on those deals typically don't fit in this market. I can explain all of this if you like - it's sort of my specialty with my clients I work with as an agent. Basically you're best move is likely to buy a 2 unit property (because the FHA guidelines make it near impossible to fit the numbers on 3-4 units in this area) and FHA will loan up to $930k in this area on a duplex which is a $32,550 down payment @ 3.5%. You can put down more if you like of course. The rental income will help with the affordability but they will only credit you for 75% of it when you go to qualify for the loan so the loan amount that you can take essentially depends on: your down payment, your personal income and assets, the rental income of the property and the expenses of the property like tax and insurance. You can send me a PM if you want more details or to make time to talk I'm happy to help!

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  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @David Abbate wow, I’ve seen so many great responses to new people on the site: welcoming them, introducing themselves, explaining things, giving advice on resources they can read. Just my luck I would come back and the only answer to my thread is you....

    0Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 957 votes
    6y

    @Selena Williams, there can be deals on 2-4 units had in the Bronx, Yonkers or NJ. Also, you should speak with a lender that specializes in FHA loans. I'm pretty sure the limits go up for MF based on income, although I could be mistaken, which is why you should speak to a specialist. Also, since you're looking to live in it (using a FHA loan dictates that) I don't believe a lender would look at the property solely as an income stream, as they will also evaluate your stability as a borrower, since you will be living there.

    This would be more of a house-hack play to lower your monthly housing cost, and get your feet into REI.

    Good luck and feel free to reach out for any further advice!

    2Reply
  • Alex Horelick
    Real Estate Agent · Westchester County, NY · Member since 2017 · 73 posts · 48 votes
    6y

    Hi Selena,

    You can certainly leverage that $150k to buy a rental in the NYC area that cash flows. FHA limits are different by each metropolitan area and type of property. You can get a 1-4 unit through FHA in NYC and the surrounding areas for 3.5% down however the standards are stricter for 3-4 units so the numbers on those deals typically don't fit in this market. I can explain all of this if you like - it's sort of my specialty with my clients I work with as an agent. Basically you're best move is likely to buy a 2 unit property (because the FHA guidelines make it near impossible to fit the numbers on 3-4 units in this area) and FHA will loan up to $930k in this area on a duplex which is a $32,550 down payment @ 3.5%. You can put down more if you like of course. The rental income will help with the affordability but they will only credit you for 75% of it when you go to qualify for the loan so the loan amount that you can take essentially depends on: your down payment, your personal income and assets, the rental income of the property and the expenses of the property like tax and insurance. You can send me a PM if you want more details or to make time to talk I'm happy to help!

    4Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    Thanks so much, Scott and Alex!! Both of you provided great advice. I know more about Brooklyn and Manhattan so my first instinct was to look for a multifamily in Brooklyn. But I’m definitely going to start researching the Bronx. If you have any recommendations of neighborhoods I should start researching that would be greatly appreciated.

    Apologies for my lack of terminology but yes - it sounds like what I’m interested in is a house hack. In short, I’d like to be able to afford the mortgage myself, and use the rental income (along with also saving on my own) in order to purchase another multifamily property in a few years that I wouldn’t live in and would be an investment property. I’d like to put the whole $150k into the multifamily to lower any costs as much as possible so my mortgage is affordable for me.

    1Reply
  • Inemesit C.
    Rental Property Investor · Brooklyn, NY · Member since 2017 · 37 posts · 8 votes
    6y

    I understand your pain! I'm currently in the process of purchasing and converting my mothers home in Brooklyn into a two family to create rental income and force appreciation. It has about $170k of equity that I will receive after the sale but the down payment and closing costs are eating it away which is leaving little to no room for renovations. Its such a headache.

    1Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    That sucks. NYC is such a hard market but it’s also full of faster potential. I have $100k equity in my place in less than 3 years. That doesn’t happen anywhere else, lol.

    I actually have $200k but I’m estimating I will have about $50k in closing costs which is how I came up with $150k. I know I can make this work I just have to find the right deal, lol. I’m looking for a turnkey property so I can immediately start renting and will most likely live in the rental until myself and rent out the owners unit to get a higher rent. That coupled with what I can save on my job should have me in really good shape to look for my next property in a few years, especially if NYC takes another real estate hit.

    Good luck with your project! Closing costs really eat into your equity...

    0Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Inemesit C. Disclaimer: I am by no means at all an expert.

    Do you think - since you have $170k in equity + however much you’ve paid on the house - it would be easier to just sell the house and buy a multifamily home that you don’t have to renovate?

    0Reply
  • Michael Baker
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 55 posts · 21 votes
    6y

    @Selena Williams is your apartment already on the market?

    Secondly, check outside of Manhattan. You have jersey City at your dispoSal too. Also, union city is close by. Where would you like to house hack?

    0Reply
  • Michael Baker
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 55 posts · 21 votes
    6y

    @Inemesit C. Where in Brooklyn are you purchasing?

    0Reply
  • Inemesit C.
    Rental Property Investor · Brooklyn, NY · Member since 2017 · 37 posts · 8 votes
    6y

    @Michael Baker Cypress hills

    0Reply
  • Inemesit C.
    Rental Property Investor · Brooklyn, NY · Member since 2017 · 37 posts · 8 votes
    6y

    @Selena Williams it would be if we weren’t in NY lol and I have a few other things keeping me from purchasing a multi family at the moment. Its a lot of back story to the situation but I would also like to keep the house in the family. 

    0Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Michael Baker yes my house is already on market and I’ve even gotten a couple offers, lol. So I’m trying to get my act together quickly.

    Thanks for the advice on New Jersey. I preferred Manhattan or Brooklyn only because I’m more familiar with these places but I’m completely priced out of Manhattan. Also the commute to my job would be easier in Brooklyn. However, I will definitely broaden my research.

    0Reply
  • Remo F.
    Investor · Brooklyn, NY · Member since 2016 · 77 posts · 26 votes
    6y

    @Selena Williams

    Hi

    From experience I would suggest house hacking.

    You have a substantial amount to play with, especially using FHA. I've bought several multi family homes in Brooklyn and I've also guided many FHA 1st time homebuyers With purchasing their first multi family homes in Brooklyn King's county a lot of my clients don't have anywhere near the amount of funds that you will soon have.

    Below Is the FHA Limit for 2 family in Brooklyn

    KINGS $930,300

    Click on the link below to see the limits across other county’s in the state of NY

    https://www.fha.com/lending_limits_state?state=NEW%20YORK

    I currently have a single person who's purchasing a fully renovated 2 family in Cypress hills on FHA for $879,000 they're going to be renting the top floor for $2200 they will be living on the middle floor and they have converted the basement into an apartment and renting that out for $1600. This person will have a total of $3800 in rent which will go towards their $4466 mortgage. Leaving them to pay the remaining $666. Granted they will have bills to pay such as their own electric and heating and what not but it's not a bad deal.

    They intend to live in it for 2-3 years, save and purchase another home and then rent out their middle floor this giving them a cash flowing asset.

    Feel Free to private message me if you have any questions. I’m resourceful, I sell homes that I renovate and have a variety of contacts who can help with mortgages

    1Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Remo F. Thanks! This is great news that FHA covers more loan for a multifamily. From the prices I've seen in the areas I'm looking at in Brooklyn this house hack isn't going to bring me a cash flow. My goal is to cover all the bills/mortgage myself and just put the rent money aside. In a couple years I'm hoping to have a down payment for another multifamily that will bring a cash flow.

    0Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Inemesit C. I completely understand. I had to sell my mom’s home in North Carolina last year. It was painful. If I could have kept it in the family I would have.

    0Reply
  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    6y

    @Selena Williams,

    Jump the gun?  More like jump the shark!  

    You want to sell the home you live in to MAYBE get an investment property.  Rents in a $1M multi (2--3 fam) will NOT cover your expenses.  Even with a 10% dp--you will be subsidizing the tenants.  

    And where will you live?  In an illegal basement apt?

    Selena, with respect, you need to find THE DEAL first.  Keep your co-op, let it appreciate more, and find an investment partner to help finance the great deal you find.  

    Keep in mind, if you are starting off investing in Bklyn or any of the boroughs, you are doing so for appreciation, not a cash-flow investment.

    2Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Marc Winter Marc, maybe you want to possible - oh I dunno - read the thread before jumping in?! Some people on here are so in their ego they can’t wait to tell someone they think is a “newbie” they don’t know what they’re doing.

    Calm down, Marc. Read the thread, have a beer, and enjoy your Saturday.

    0Reply
  • Abel CurielBusiness Member
    Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    Hey @Selena Williams ,

    I don't think you've jumped the gun here. You're on the right path. You took action and that is what many people overthink or NEVER do. Trust your gut, you've gotten to this point because you know there is opportunity in the equity you've built over the years.

    You've also received some great feedback on this thread regarding house-hacking and the possibilities of cashflow and/or appreciation with multi-family investing - shoutout to @Inemesit C.!

    There are tons of options for you given the fact that you'll have a pretty good budget for an FHA down payment, closing costs, and minor renovation/upgrading. Now that you have a good idea of what amount of cash you'll have on hand, you can start running some preliminary numbers on potential deals.

    Best of luck to you moving forward!

    Abel

    REbuild Team - eXp Realty5234 Reviews
    WebsiteView Page
    3Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Abel Curiel thanks!! And thank you to everyone on this thread that gave actual advice, lol.😐

    Thanks to you guys I spoke with a mortgage specialist today to run some numbers. Next step is getting my paperwork together and getting this loan. But the numbers look excellent so I’m super excited. Depending on what I end up getting and the rent, I might even end up with a couple dollars cash flow.

    I plan to hustle the hell out of whatever place I buy - short of living in the basement, lol.

    0Reply
  • Abel CurielBusiness Member
    Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Selena Williams:

    @Abel Curiel thanks!! And thank you to everyone on this thread that gave actual advice, lol.😐

    Thanks to you guys I spoke with a mortgage specialist today to run some numbers. Next step is getting my paperwork together and getting this loan. But the numbers look excellent so I’m super excited. Depending on what I end up getting and the rent, I might even end up with a couple dollars cash flow.

    I plan to hustle the hell out of whatever place I buy - short of living in the basement, lol.

    Thats great to hear!!! Feel free to keep us posted on your progress!

    REbuild Team - eXp Realty5234 Reviews
    WebsiteView Page
    0Reply
  • Inemesit C.
    Rental Property Investor · Brooklyn, NY · Member since 2017 · 37 posts · 8 votes
    6y

    @Abel Curiel we meet yet again! 

    @Selena Williams sounds good so far and you’ve already made major progress. I would say keep the faith and you will definitely find something. Just make sure the numbers work. Also, in response to your earlier question, in my case it’s actually cheaper for me to purchase my mother’s house and complete a conversion into a multi family than to purchase a turnkey multi in NYC. 

    I suggest reaching out to @Abel Curiel as he is a goldmine of knowledge! He’s actually been a great help through my own situation in regards to the purchase and has a great network of professionals as well. 

    Best of luck with everything!

    1Reply
  • Remo F.
    Investor · Brooklyn, NY · Member since 2016 · 77 posts · 26 votes
    6y

    @Marc Winter if you get a chance read “Ego is the Enemy”  

    2Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Abel Curiel I would definitely be interested in taking the advice of @Inemesit. I will PM you.

    Right now I don't think I have anything to do but wait for approval for the FHA loan so I know exactly what my interest rate and PMI will be, but this is my first time doing this so I would welcome any advice if there is anything else I should be doing.

    I’ve decided on my own my limit is $999k because I don’t want to run into the mansion tax and it’s looking like a buyers market right now because of this tax. I see a decent amount of multifamilies in Brooklyn below $1M or coming down to $999k after sitting on the market for a while. Plus, by the time my place goes into contract it will be close to November = market slowing down. All that makes me think I can get a good turnkey for $999k or less. If I can get at least $4000 total rent out of a place I will be super happy and in a position to buy my second property in 1-3 years and start making some cash flow.

    If you have any advice on specific areas I should concentrate on more or anything else I don’t know that I don’t know that would be great!

    0Reply
  • Judy Parker
    Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
    6y

    Two things to keep in mind:

    a) Multi-family properties in NJ, PA and other parts of the country are in high demand by investors. That demand causes bidding wars which drives up the prices to unreasonable levels.

    b) Four months ago Cuomo put new Rent Control legislation into effect. This is having a really bad effect on New York residential multi-family properties. Make sure you research the new regulations before investing in NYC residential multi-family.

    2Reply
  • Selena Williams
    OP
    New York City, NY · Member since 2019 · 52 posts · 38 votes
    6y

    @Judy P. Thanks for the advice Judy! I’m looking at properties in Brooklyn though and not NJ or PA. The properties in the price range I’m looking at don’t seem to be moving very fast at all. Most have been on the market for over 70 days, some well into the hundreds. My real estate agent also seems to think it’s a buyers market right now, I’m guessing this is due to the mansion tax. The properties I’m looking at are right below $1M and just over $1M. The ones just over aren’t moving. Which makes me confident if I offer $999k they will take it.

    I believe that new regulation is there to protect rent stabilized apartments. ? I skimmed over it a while back and didn’t see anything that would affect me since my units will be market value but I will definitely bring this up with my agent. Thanks for pointing it out!

    2Reply
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