Want to invest in Market with better cash flow

11 Replies

Hello, I am a new member and would like to ask a question. 

I currently have an investment property in Brooklyn worth 900k with a 300k loan. Rent is $3100 and after expenses I bring in $300 per month although I do pay down $1350 on my mortgage. I’m thinking of selling and buying equivalent value of properties out of NY to generate more cash flow. I should be able to do this right?  I feel like in a 900k property I’m not generating much cash although I have certainly done well with equity build up the last few years.  Any advice on areas..Or if this makes sense ?

Hi @Kathrine Bowers , that is an interesting scenario. For this $900K property, are you cash flowing $300/month, net? If so, those don't seem likely particularly strong returns and I would encourage you to look for other options. You mentioned buying properties out of NY. Are you looking at any other markets in particular? Do you have $600K of equity in this Brooklyn property? Have you thought about/evaluated either doing a refinance, HELOC, or a 1031?

Hi..Yes 600k in equity and I bring in $300 net cash flow and pay down $1350 on mortgage. I was thinking of a 1031 exchange and buying  properties outside NY to generate a better cash flow.  Would love suggestions on other areas to invest. Thanks.

Hi @Kathrine Bowers - I’d draw a circle from NYC with a radius of 2 hours of travel time and see which areas that includes. It gets you most of Long Island to the east, up to Duchess/Columbia County/Greene County(and a quite few others) to the north, quite a bit of NJ to the west and south, and Philly to the west. I believe the cash flow/yield in many of those areas(maybe all of them) would be better than in NYC.

You can expand your search into the less commutable areas, but if you can stay a little closer to home, there’s value for those occasional property visits you might choose to make.

YOY median sales prices are for the most part flat or down in prime Brooklyn. Selling now while prices are at or near peak sounds like a pretty good idea. Almost anywhere you go will provide better cash flow than NYC. I'd first figure out how active or passive you want to be and go from there.

@Kathrine Bowers plenty of higher cash flow markets in 2 hour radius of nyc. I see a lot of nyc based investors going into Hudson valley , and then PA markets as they’re drivable. I would suggest at least exploring the refinance along with the 1031. There is something to be for the resilience of values here.

@Kathrine Bowers the 1.2% COC return you're getting isn't very good. Selling and doing a 1031 exchange (if possible) would make a ton of sense. @Jason Lee makes a great point about deciding how active or passive you want to be.  

If you'd like to chat, feel free to shoot me an email, my contact info is in my signature.

@Kathrine Bowers initially I thought 1031 all the way, but on reflexion, a heloc and reinvestment  would allow you to get a better return and keep the property you currently own. If I were you I would strictly look into out of area multi family dwellings. 

@Kathrine Bowers Thanks to everyone for your responses. So just to give a little more info my goal would be to bring in 3-4K per month net cash after all expenses. Is this possible? That’s why I was thinking of selling rather than a refi as I really would rather some extra income. If I was to sell I know I would need to buy the equivalent of $900k in property to avoid taxes this would also Involve gettIng a $300k loan. (Or I could do a huge cash out refI but not sure If I would bring In much extra Income this way?) I am very new to this so not sure if these numbers make sense but from reading about the 1% rule I feel like I’m not making my investment work for me right now, although I do love the safety of having $$ in Brooklyn. I’m just in a situation right now where I need to bring in some extra income.

As you mentioned that you are looking for properties that generate more cash flow, out of state investing is a great option! 

  There are plenty of markets in other states that allow more cash flow in comparison to NY. If you are Considering OOS, three major things to consider from my personal experiences: 

1. Rent to Value Ratio: This is the biggest determinant of cash flow. Make this your benchmark when you search for new markets if your goal is to be a cash-flow investor.

2. As an OOS investor, you want to invest in markets that have low property taxes, high rental demand, landlord-friendly laws. 

3. A property manager who can educate you on a market, help you form a strategy, fit right into your due diligence process, and execute on a clear takeover game plan as soon as you hold title. ( very important if you are not going to manage yourself). 

Subbie Kaur 
Ace Properties, LLC 

Hi @Kathrine Bowers - You should easily be able to get higher returns in the mid west. I live in Ohio and know that Cleveland and Columbus have some great returns but i personally invest in Indianapolis simply because i found a great team over 5 years ago. I got an average monthly net cashflow on eight houses of over $3k last year on turnkeys i’ve Purchased. The challenge will be finding a good team that you can trust and make a long term relationship with.