Investor · Hackensack, NJ · Member since 2017 · 15 posts · 3 votes
Hey BP folks. Just starting on this real estate journey in NYC. NYC is having a tough year and some people say next year will be tough as well. Im not sure what this means for the real estate market. Im interested in the flatbush area to buy a 2 family for a buy and hold strategy. Many of the deals in that area have non paying tenants that will come with the property. This could potentially mean I will buy a problem that wont be solved until the end of 2021. There may be deals where the holding cost is low enough that I can take the hit for a year and still come up on top.
My question is should i do that? and should i jump the gun now? Some people talk about a market downturn in NYC next year. how valid are those opinions? also what if flatbush and east flatbush never really gentrify? Those are my main concerns that are preventing me from making offers today.
Real Estate Agent · New York City · Member since 2020 · 819 posts · 641 votes
5y
Do a house hack in NYC itself since you live nearby! 3.5% down via FHA lets you buy a whole lot of marquis NYC realty. Conserve the rest of your equity for other deals too or carrying for a few months (maybe a year).
Personally, I think all the folks who moved away are already getting bored and already coming back. Plus, the vaccine is getting rolled out which will curb the spread tremendously. Now is the time to buy.
Cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx. The kicker here is that rates are much lower than the 7% that OP noted. Today nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise.
Long term, I think NYC will come back as it always has time and time again. I am also a great believer in investing when there is distress and deploying capital when you can.
If you are looking for yield in the short run, Manhattan may not be for you. However, it is certainly the most attractive it has been in years from a cash flow perspective. If you are seeking out asset accumulation and equityappreciation over the long term then there are certainly fortunes to be made. And there is still plenty of cash flow opportunities in the outer boroughs if you buy right!
Lastly, as your primary residence, a lot of equity appreciation will be TAX FREE ($250k exemption if single, $500k exemption if married) which is major.