Seeking Guidance on Financing and Operating a Multifamily Commercial Property in NYC

[JV Hilario]

Hey fellow investors!

I'm excited to join this forum and tap into the knowledge and experiences of this community. I'm currently considering a potential investment opportunity in NYC, specifically a 5-10 unit multifamily commercial property with a price tag of under $10 million. As an experienced real estate investor in single-family with a short-term rental strategy, I want to get exposure to commercial real estate to build a solid portfolio.

Property Details:

• Location: NYC (specific neighborhood yet to be decided)
• Type: Multifamily commercial property
• Unit Count: 5-10 units
• Budget: Under $10 million

Owner-Occupier Strategy:

I've been thinking about occupying one of the units as my primary residence initially. This approach not only allows me to enjoy the benefits of living in NYC but also provides some significant advantages. I grew up in NYC and am familiar with the market. By occupying one unit, I might qualify for owner-occupier financing, which could offer more favorable terms and lower down payment requirements.

Switching to Full-Time Operator:

If everything works out well, and the property generates sufficient cash flow after factoring in the net operating income and debt service costs, I'm planning to transition from my current occupation to full-time property operator and manager. This way, I can be more hands-on and implement strategies to maximize the property's potential.

Capital Acquisition:

However, the one thing holding me back from proceeding with this fantastic opportunity is the capital required to acquire the property. I've been exploring various financing options, but I'd love to hear from those of you who have experience with similar investments in NYC. How did you secure the necessary funds for your first commercial property purchase?

Questions for the Community:

1. What financing options do you recommend for a commercial property investment of this size in NYC? Are there any specific lenders or programs I should explore?
2. Is owner-occupier financing a viable strategy, and what are the potential advantages and pitfalls I should be aware of?
3. What are some creative ways to raise capital for this investment? Any success stories or tips you can share?
4. For those who own or manage multifamily properties in NYC, what advice do you have for a first-time investor looking to be an active operator?
5. How do you evaluate the potential cash flow of a property accurately, considering the unique challenges of the NYC market?

I'm open to any advice, insights, or personal experiences you can share. Your guidance will be immensely helpful as I take this important step towards building a successful real estate investment career. Thank you in advance for your contributions!

[Darnell Lockett]

Hi @JV Hilario. I see you have experience with SFH STR. Do you have any experience with 5-10 units? Have you managed any? That would be one of the many questions a lender/broker will have for you. As for capital, unless you're going the JV or syndication route...you'll need to bring the capital to the table. Your capital will need to take into account the down payment closing costs and reserves. This is a commercial property so you have flexibility as far as where the capital can come from.

1. You can look at traditional financing such as a conventional loan. You can also look Non-QM loans such as DSCR loans and more.

2. What do you mean by owner-occupied financing? Are you talking about a FHA loan? If so, you can't use that for a commercial property.

3. You can try to raise capital through private sources (family, friends, associates). I've even seen where new investors have taken a deal to their local Real Estate Investors Association (REIA), and had them fund the deal. This obviously was a cash deal.

4. I can't speak on this..I'm down in Miami. 

5. I look at DCR to help determine if I'm cash flowing to my level of comfort. I always want to be at least at 1.30 DCR, which lets me know I'm cash flowing okay. If I can be at 1.50..that's even better. We're in a hot rental market down here so that "shouldn't" be a problem.

I'm always happy to answer any questions or just chat about suggestions. 

[Mohammed Rahman]

Hey @JV Hilario - I'm an investor & broker in NYC, and work with private buyers & owners of commercial properties. 

To answer your questions right away: 

- There are a few specific lenders I've had a good experience with. You'll find that most lenders aren't too different and will focus more on the numbers of the property itself. Given the current market rates, be prepared to have your debt obligation eat up a third or more of your monthly cashflow. 

- Yes owner occupied financing is a great strategy. Banks like this. However, note that an owner-occupied commercial loan means the owner has a business that is operating in the space itself. Not that the owner is living in one of the 5+ units in the apartment itself 

- Speak to your network about raising capital. Work with a broker that can also negotiate a creative deal structure that makes sense for buyer and seller (shameless plug lol). 

- Managing commercial properties in NYC is different than managing multiple residential units. It's more expensive up front but ultimately it's a B2B model, which means less emotions. However, commercial tenant laws in NYC are still strong so you shouldn't be shy to pay up front for a good commercial leasing attorney to structure your tenants' leases. 

- I have a financial model I plug in my information into. There are few calculators out there you can pay a couple of $ a month to use. It's not rocket science thankfully, a quick Google search can help you here. 

Please DM me, would be great to chat about your project. 

I'm currently working on 2 separate offmarket properties valued at $6M and $7M separately. Additionally, I'm also able to access a 10-unit multifamily building with a remaining tax abatement that's for sale if you're interested. 

We'll talk when you reach out thanks. 

[Harold Looney]

JV Hilario - I'm a 2 Unit Owner in Bayridge Brooklyn looking to expand my NYC portfolio. Let's connect via DM.