Investing in Decreasing Population Market e.g. Endicott, NY
Rental Property Investor · Member since 2019 · 10 posts · 3 votes
Hello BP community!
First time post and I'm sure not the last. I'm a NYC resident and have been seeking to invest in an affordable market where it makes sense. I came across what I think is a great deal in Endicott, NY. A duplex (asking $65k, putting 20% down and financing the rest). Cash on cash ROI of 25% (mortgage+interest, 10% property mgmt fee, 5% Vacancy, 5% Capital Expenditures, Insurance, Property taxes, Water & Sewer).
Property is in great shape, just needs some elbow grease in the kitchens ($2.5k) and we're good to go. I found the property off market so I am the first to this hopeful gem.
I did some research on the town such as medium income, employment and population growth. All are not the best indicators I would like to see, specially being my first investment property.
Is this a good investment or should I pass? Any advise & guidance from the BP network would be greatly appreciated.
Thank you - Semper Fi - Chris
@Ari Hadar a seller concession is generally cash back at closing for something. Often it's closing costs, but can also be credits for repairs or something like that. First-time homebuyers use this technique often to cover their down payment and loan fees.
The way this works is that the sale will show as $100,000 on public record, for example, but a 6% concession would mean the seller only took home $94,000. The actual property value is what the seller netted ($94k), not the total sale price ($100k). (I mean this gets tricky because technically the bank has financed the full $100k, and have an appraisal to back that amount up... but at the end of the day, the seller accepted the net, not the full amount, so the lower amount is the true market value.) The MLS is where I find info on seller concessions, and when I'm valuing properties I use the net number.
Zillow and Trulia and the public record show the full financed amount, and those numbers could always be up to 6% lower.
Hi Chris,
I think it depends on what your target population is and where the house is located. Given the information you provided, it sounds like yes, it could be a good investment. At least on paper. If you are not local to the area, make sure you have people you trust in the area that know the neighborhoods and can look at the property. You could potentially be buying in an undesirable neighborhood, or the house may need more work than you think. Or it may not rent as high as you think. (In general, rent in that area has gone UP, mostly driven by increasing student rent and spilling over into the long term residential market. But Endicott is also not a popular student rental area.) Have you seen the house in person?
It sounds like you may not need an agent on this deal, but if you'd like to work with one, or want some additional help, I recommend talking to @Stephanie Jacobson. I have worked with Steph a handful of times, and she does a great job, particularly in locating deals, networking, and negotiating! She also knows a great inspector named Rick Kie with Accredited Home Inspectors. He's not on BP as far as I know. I worked with Rick on the last purchase we (almost) made in Endicott (I was very grateful to him for being so thorough!).
I am a detail-oriented person, and I also emphasize quality in any property I buy, particularly in regards to the foundational aspects - foundations, roofs, structural, plumbing, electrical, etc - the non-cosmetics. They may not bring in higher rents, but if you ask me, they are much more important.There are certainly deals in that area (Endicott, Johnson City, Binghamton, etc), but there are also a lot of properties with - ahem - deferred (or just plain improper) maintenance. Just be sure to do your due diligence.
Also, take a look at this thread from earlier this year:
https://www.biggerpockets.com/forums/55/topics/813778-newbie-investor-looking-to-finally-jump-in?highlight_post=4785202&page=1
Thanks for posting. I love off market deals. The economics of the deal look ok but I'd be interested in a few more things, given the times. Is it occupied, and are the tenants paying rent? How will you manage it? If you're not local, you'll need a local property manager. I only manage my own property but I could refer someone. It's real estate so...the location is important as @Paul McCue noted. There are no students in Endicott but there are some terrible neighborhoods. If you haven't already, I'd suggest you go there, then go back at night.
Thanks for the mention, @Paul McCue!
@Christian Valencia, Paul's absolutely right. Location is everything. I have a pair of duplexes on the market in Endicott right now that have decent rents, great rental history, and one in particular is in excellent shape. But they're just on the wrong street. One block over would make a huge difference, but I'm having a very hard time selling these.
Let me know if you'd like to discuss further. :)
@Paul McCue Thank you for all the details. Both units combined bring in $1750 where the rents are just about market price. You are right and I will be very cautious when inspecting the property in a couple of days. As of now I do not think I need an agent but in the case I do I will reach out to @Stephanie Jacobson, thanks for the recommendation.
I think it will be wise to get the home inspected, a connection with Rick Kie would be greatly appreciated. Thanks for sharing the thread, I read it and picked up good nuggets.
Thank you Paul
Chris
Thanks for posting. I love off market deals. The economics of the deal look ok but I'd be interested in a few more things, given the times. Is it occupied, and are the tenants paying rent? How will you manage it? If you're not local, you'll need a local property manager. I only manage my own property but I could refer someone. It's real estate so...the location is important as @Paul McCue noted. There are no students in Endicott but there are some terrible neighborhoods. If you haven't already, I'd suggest you go there, then go back at night.
Hi David,
All great points and thanks for sharing. I will be checking the property out his weekend, it's located in the Village Center. I have only gone to Endicott one time for a couple of hours and it was during the day time. It looked like a descent neighborhood to me, then again I'm from the City. As per the seller the tenants are paying the rent and he takes care of his properties. He will also be assisting with property management whenever I cannot get to Endicott. However, I think having options for a recommended property manager would be great.
Thanks David
Thanks for the mention, @Paul McCue!
@Christian Valencia, Paul's absolutely right. Location is everything. I have a pair of duplexes on the market in Endicott right now that have decent rents, great rental history, and one in particular is in excellent shape. But they're just on the wrong street. One block over would make a huge difference, but I'm having a very hard time selling these.
Let me know if you'd like to discuss further. :)
@Stephanie Jacobson, thank you for replying to my post. I'm not too familiar with the area but I will be spending some time there this weekend. The duplex I am going to see is in the Village Center and from what I found online it might not be the best of neighborhoods. I would not know this 100% because I'm not from the area. What are your thought?
Thanks
By village center, do you mean smack in downtown Endicott? Well, it still goes block by block there. I run comps two ways:
1. By the price per square foot, and price per unit. Check all the recent sales you can (Zillow has enough information to go on for this, but they don't show seller concessions so it's only an approximation), and average the two numbers you get for each property. I'll typically go back 18 months, and try to stay within a few block radius. If you notice a bunch of higher sales a few blocks over but lower sales near your place, take note.
2. Actual financials and rental history. Sometimes, a property is in an undesirable neighborhood, but the cashflow is good. I usually want to see around an 8-10% cap for properties in decent condition, higher if they need more work. If it has a strong rental history and decent rents that the seller can prove are up to date, then it's generally a good buy. BE CAREFUL. We have a statewide moratorium on evictions right now, so be sure to acquire some sort of T12 from the seller's accountant, or some other satisfactory way of assuring all tenants are current on rent.
Did you ever pull the trigger on this Endicott property. I'm new to Endicott/Binghamton investing and have a couple of properties I am considering. Like you, I am first time investing in Endicott and learning about the area.
By village center, do you mean smack in downtown Endicott? Well, it still goes block by block there. I run comps two ways:
1. By the price per square foot, and price per unit. Check all the recent sales you can (Zillow has enough information to go on for this, but they don't show seller concessions so it's only an approximation), and average the two numbers you get for each property. I'll typically go back 18 months, and try to stay within a few block radius. If you notice a bunch of higher sales a few blocks over but lower sales near your place, take note.
2. Actual financials and rental history. Sometimes, a property is in an undesirable neighborhood, but the cashflow is good. I usually want to see around an 8-10% cap for properties in decent condition, higher if they need more work. If it has a strong rental history and decent rents that the seller can prove are up to date, then it's generally a good buy. BE CAREFUL. We have a statewide moratorium on evictions right now, so be sure to acquire some sort of T12 from the seller's accountant, or some other satisfactory way of assuring all tenants are current on rent.
What exactlyddo you mean by seller concessions?
@Ari Hadar a seller concession is generally cash back at closing for something. Often it's closing costs, but can also be credits for repairs or something like that. First-time homebuyers use this technique often to cover their down payment and loan fees.
The way this works is that the sale will show as $100,000 on public record, for example, but a 6% concession would mean the seller only took home $94,000. The actual property value is what the seller netted ($94k), not the total sale price ($100k). (I mean this gets tricky because technically the bank has financed the full $100k, and have an appraisal to back that amount up... but at the end of the day, the seller accepted the net, not the full amount, so the lower amount is the true market value.) The MLS is where I find info on seller concessions, and when I'm valuing properties I use the net number.
Zillow and Trulia and the public record show the full financed amount, and those numbers could always be up to 6% lower.
Hi @Long Wong,
It has taken longer than anticipated because a lien was found in the title. However, we finally came to a resolution and that delayed the closing date. The property appraised for $75k and the accepted offer was $65k which I am happy with. The current rental income is $1,750 per month which leaves me a descent positive cash flow.
Right now my only worry is finding a property manager because I live 3+ hours away from Endicott. This will be my first investment property in the area and I would like to continue to look for future deals. I don't live in the area but definitely trying to expand my network.
Message me if you have any questions or want to follow up ~ Chris