Investing in NYC?

Question

The more I read about real estate investing on this blog, the more excited I become about actually starting my real estate investing career. I've read about many strategies for how to invest with little money down, how to invest in owner-occupied multi-unit properties, how to become cash flow positive, etc. These all make sense to me and I can see how it would work in many markets across the country. But will these kinds of strategies work in New York City for early real estate investors, or is NYC a market to approach later in my real estate career?

Thanks in advance for the help!

Oisin Lewis · Answer

@Jerry Padilla yes I have considered that as a strategy, and I think that's what I will try to do actually. Because I'm new to the real estate world I'm still trying to calculate what the actual closing costs would be and how much rental income a multi-family property actually makes in NYC. Many have said that traditional income forecasting methods (50% rule, 1% rule) aren't as applicable here because rents are higher, vacancy is lower, etc.

I'll look more into the FHA mortgage. Thanks for the advice!

Robert Skulka · Answer

team of Alaskan Success, Inc whole sale single family in greater Stamford Connecticut. An branching out.

We look forward to meeting like minded as well...

Jerry Padilla · Answer

@Oisin Lewis

Have you thought of purchasing a duplex to fourplex and living in one of the unit's? You could get an FHA mortgage with little money down. This is a strategy that many investors use to start out.

Adam K. · Answer

@Oisin Lewis The rules of thumb aren't particularly useful for Manhattan or Brooklyn. Those are usually for SFRs, and there just aren't many of those here except way out in BK. Vacancy in NYC is way lower, and repairs/maintenance are going to take up a smaller % of the rents, because the rents are so much higher. Appreciation here has also been way higher than most places and the demand for living in prime neighborhoods continues to increase.Just analyze the properties individually and you'll see a more accurate picture than the 50% rule. NYC is its own beast - you can find cash flow here, it's just a lot tougher and at higher $ levels.

Oisin Lewis · Answer

Thanks for the response @Jonathan Makovsky and apologies for the delay in replying. I was looking for investment properties in up and coming neighborhoods of Brooklyn to start, but am open to other possibilities. I hadn't considered CT but I will now.

I've heard about a couple rules of thumb that say a good investment property should generate rent at 1% of the sales price, but that seems nearly impossible in any of the boroughs here. (An $800k two unit building in Bushwick could get roughly $5-6k/month). I've also read it's important to account for only being able to use 50% of the cumulative rent towards paying off a mortgage, because of repairs, vacancy, property management, etc. that drive the average cash flow downwards. Abiding by these seem to make investment properties for first time buyers very prohibitive in NYC. What's your take on those rules?

Thanks!

Oisin

Jonathan Makovsky · Answer

Hi @Oisin Lewis welcome to BP!

I live just outside of NYC and invest in CT. There are many markets within a 60 - 100 mile range outside of NYC that you can find with lower property values and higher cap rates. Do you know what type of investing you're looking to do? That might help narrow the geographic location down.

Best of luck to you.