PLEASE HELP: Just starting out Multi Family rental in queens NY

4 Replies

Hello again. Here's my situation. Im broke. I have great credit thanks to the myfico forums and a total credit limit of $14,000 I have no debt and just pay my cell phone bill and the Verizon triple play package bill for my household which totals about $200 a month. I get financial aid for school so i'm good.

The reason i'm broke is because I helped my mother acquire a SFR so she could own her own home and stop wasting money renting I gave her about $12000 total. I currently live with her, she pays the mortgage. I'm 21 making $35,000 a yr now while still in college full time.

I read an article saying the FED might raise interest rates. I want to get into real estate before that happens or else i'm screwed.

I currently live in Brooklyn and was thinking about purchasing a multifamily in Queens NY with FHA 30yr financing for rental purposes. I wanted to keep my budget to no more than $120000. I know .. I know. The houses might not be in good condition but I was thinking I could get a FHA 203k loan built into the total loan amount and also try to get down payment assistance added to it too for a maximum loan amount of $160,000.

The plan is to find a duplex with at least 3br/1bth on one floor and 1br/1bth on the other. I would live in the smaller unit and rent the other out for about $1600 a month to cover the mortgage then after a yr (due to fha guidelines ) move out and rent the other unit for $1000 for a monthly total of $2600 minus the mortgage. Then after another year goes by I will then refinance with a conventional loan, take equity out and start flipping properties out of state with the cash? Will this work? I am I missing anything?

This is not super detailed I just want to see if i'm in the right direction. I know some of you guys are well off. I want to be the same when i'm at that age.

hi @Ricardo S.  

I am a relatively new real estate investor but thought I could give you my thoughts. First, you are not screwed when the fed raises rates. In fact they haven't even set a date of when that would happen but the futures market for interest rates indicate a rate hike could come sometime in middle 2015. Additionally, when they do raise rates it will be in small increments such as 25bps or 0.25%. A rise in rates might actually cool some prices in some markets as getting financing will be more expensive. Bottom line is I wouldn't let this spoil your plans. 

I also live in brooklyn and have been looking for multi family properties. I am not sure where you would get one doe 160k. I have seen complete dumps that are still north of 500k. I too have looked into fha financing and at first I thought it was an interesting idea. But the mortgage insurance you have to pay is a a lot. That mortgage insurance is essentially money that is not being used to pay down your mortgage. I have been exploring alternative ways to finance such as piggy back loans or seller financing. Since you are young and not employed full time and still in college maybe it is better to just save as much money as you can? Those places that cost 160k are not going to rent for that much.  You might be stuck looking in Canarsie or east New York if there are even places that cheap. 

I would just say do your research and homework and don't be too quick to pull the trigger. Good luck! 

Martin

@Ricardo S.

I have to say i agree with everything Martin is saying . Interest rates are not going to be a main factor anytime soon so i would not worry about that too much.

The numbers you are looking for (160K) is not doable in NYC right now on duplexs. You might get lucky,...you never know.

You are young, work, save and learn. The opportunities will come along and you will be in a better position to take advantage of them.

Good luck to you!!

@Charmaine M.   is the process the same in getting a loan for a multi family in for example Jersey City  when you are an out of state resident? I know NYC is a PATH train away but are there different requirements? Meaning can I go to a Wells Fargo in NYC to obtain a loan for a property in Jersey City.

@Martin Woll   Thanks for the insight. I will try to save around 10K by  August next year, is that a good amount to start with? I am Full time at my job and full time is school btw. The only reason im still going to hold on to my job is because FHA requires you to have your job for 2yrs minimum. I graduate in June with a Engineering Bachelors. I am aware the mortgage insurance is insane but I would only hold on to it for about 2yrs then refinance.

@Ricardo S. Ricardo, if you want a duplex in one of the 5 boroughs I think the price will be at least $500k, which is what have been seeing. Clearly, this might be slightly higher than some very undesirable places but I am looking to be close to a subway line and not too far from manhattan. You can certainly do FHA and I was thinking of doing that but at $500k your mortgage insurance will be another $500 a month on top of principal, interest, taxes and insurance. In nyc you will most likely not find a place that will cash flow using that method. It increasingly difficult to find props that will cash flow with conventional financing. My suggestion is that you put a lot of effort to find an engineering job. I work full time and am able to use all my savings to deploy into real estate. You need to save a lot more money too. I am thinking it just might make sense to put down 20% for a down payment. Trust me, the most important thing you can be doing for your financial freedom is to find a full time job. Then at night and on weekends you learn more about real estate. If you have questions or comments let me know. As I said this is just my opinion.

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