$3M in buying power with 20% down - what to do?

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$3M in buying power with 20% down - what to do?

Jack K.
Brooklyn, NY · Member since 2017 · 18 posts · 4 votes
Based on income, I qualify for a $500k mortgage and my friend qualifies for $2M mortgage. Together we want to go in on a real estate project(s). We can throw down around $500k-700k. We are both based in Brooklyn. My plan was to buy this extremely nice 2-unit building in Williamsburg, Brooklyn and rent it out doing short-term rentals while living there. If I didn't do short-term rental the place wouldn't cash flow. However this area continues to grow in value. I would be managing the deal and hopefully turn this one into more and more future deals. Thoughts/recommendations? I feel like this would be easier if I wasn't based in New York.
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OnYango Williams
Real Estate Agent · Brooklyn, NY · Member since 2016 · 45 posts · 11 votes
9y

Jack with the way things are going in the market, some properties are sticking around longer than usual. Of course, since you are loiking in New York, you will spend more than most any other market, with the exception of LA. Now the later you wait, the more the ability to rent right away comes into question. My question to you is, are you only tied to Brooklyn?

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  • OnYango Williams
    Real Estate Agent · Brooklyn, NY · Member since 2016 · 45 posts · 11 votes
    9y

    Jack with the way things are going in the market, some properties are sticking around longer than usual. Of course, since you are loiking in New York, you will spend more than most any other market, with the exception of LA. Now the later you wait, the more the ability to rent right away comes into question. My question to you is, are you only tied to Brooklyn?

    1Reply
  • Jack K.
    OP
    Brooklyn, NY · Member since 2017 · 18 posts · 4 votes
    9y
    Hey OnYango, thanks for your response. Definitely prefer New York because I'm a huge fan of AirBNB'ing which I love doing for income. However, if there are opportunities elsewhere that make sense we would consider it. NJ markets are also something I'm interested in.
    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    @Jack K., does the neighborhood/city the property is located in allow AirBnB?

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  • OnYango Williams
    Real Estate Agent · Brooklyn, NY · Member since 2016 · 45 posts · 11 votes
    9y

    Jack New York is a great place to invest in. I was just wondering' if you were tied to the Williamsburg neighborhood? I'm sorry, so I phrased my question wrong. I should have asked about neighborhoods.

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  • Naum Raz
    Investor · Brooklyn, NY · Member since 2016 · 55 posts · 38 votes
    9y

    First of all I would do the numbers, is the deal cash-flow positive, what will be expenses, rent etc.. It's hard to recommend or not recommend a deal just based off the price. That being said, Airbnb is facing stiff resistance in NY and from all the places NY is one of the most difficult to do Airbnb with all the new regulations. I am looking into getting an Airbnb property as well but in other areas not in NY most probably NJ. Thirdly, I would not suggest basing your decision on appreciation because even though the value of properties across the whole NYC are rising you can never be certain if they will continue to rise. When things go great everyone always thinks they will continue to be great that's how bubbles are created and that's what happened in 2007. See if the deal cash-flows after paying mortgage and all other expenses. Lastly, 3M or even $500K can get you way more in other areas even in NY or even in areas very close to NYC. I was just in Williamsburg few weeks ago, rents go anywhere from $2,300 for average apartment to $4,000 for a nicer apparent every month. Even with Airbnb you have to keep in mind maintenance costs, supplies, cancellations, management etc.. If after all that you are still cash flow positive it will be a fraction of what you can get in other areas. That's one of the reasons I don't invest here but in NJ. I would personally look into other areas. 

    1Reply
  • Chris Grenzig
    Property Manager · Orlando, FL · Member since 2016 · 479 posts · 277 votes
    9y
    Jack K. I have no experience with Airbnb, but if you should happen to think about going out of state multifamily let me know, that's what we specialize in. I just moved to Bushwick a few weeks ago so we can meet up and have a chat if you want. If not best of luck with the duplex!!
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  • Remo F.
    Investor · Brooklyn, NY · Member since 2016 · 77 posts · 26 votes
    9y
    The money you would get from airbnbing in Williamsburg compared to airbnbing in Bushwick or Bedstuy isn't significant enough to consider purchasing a property with a high price tag in Williamsburg. You're better off getting something for around $950k -$1,100,000 that needs light work in bushwick or Bedstuy for better cash flow. I had a friend that airbnb his rented apartment out in bushwick whilst traveling and they were bringing in around $4-6K a month (depending the time of year). The landlord put a stop to it but that gives you rough ideas on some numbers.
    0Reply
  • Mateusz Prawdzik
    Developer · Little Ferry, NJ · Member since 2016 · 426 posts · 226 votes
    9y

    @Jack K. I would stick to a less aggressive market like NJ, even though it is still aggressive, it's less hot than NY. Also, cap rates are garbage right now, back 2-3 years ago you can buy for 12-15% cap rates and it was great, now people are jumping for joy at 5-6%. With house prices going up, cap rates go down, they are indirectly proportional. So I would flip and use the increasing appraised values on houses in most markets in that advantage and flip until I can. I am personally feeling a pull back in another year or two, at which point try to sell all your inventory, sit on cash and wait for that pull back and then buy at 10-12% cap rates where everyone else was buying at 5-6%. 

    This is my theory and what I am planning to do to the tea. I am getting 15-16% cap rate buy and holds from special people that I know, but most people are paying very heavy premiums. I will only hold if I get a return like that, otherwise I'm flipping. I would do this if I were you, connect with me if you any questions about the market in NJ, I do most of my business in North and central NJ.

    1Reply
  • Jerry PadillaBusiness Member
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    9y

    @Jack K.

    Since you plan on living in the one unit, why not do a primary mortgage? You will have less of a down payment and a lower interest rate. Then other properties you can go in with a partner if you choose too. 

    [email protected]585-204-6923
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  • Hadley Benoit
    Real Estate Agent · Freeport, NY · Member since 2017 · 28 posts · 3 votes
    9y
    @Jack K. If your looking to airbnb with multi family there is a property in Flatbush you should take a look at. Reach out to me and I'll give you details.
    0Reply
  • Hadley Benoit
    Real Estate Agent · Freeport, NY · Member since 2017 · 28 posts · 3 votes
    9y
    @Jack K. , if you interested in doing airbnb with multi family there's a property in Flatbush I think you should take a look at. Reach out and I'll give you details.
    0Reply
  • OnYango Williams
    Real Estate Agent · Brooklyn, NY · Member since 2016 · 45 posts · 11 votes
    9y
    Jack there is a property in Fort Greene that is a seven unit brownstone. Each unit is a studio that could be used for airbnb. Inbox me for more information.
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