Newbie - Take the next step?

7 Replies

Hi all,

I'm relatively new to real estate investing and am looking for some advice.  I bought my first investment property in Brooklyn NY ~6 years ago.  It generates a profit each month (rent is 4500/mo, expenses including mortgage are around 3500-4000.

Currently the property is worth about double the outstanding mortgage balance.  Most of this equity is due to appreciation in property values over the period I have owned it.

I would like to take the next step in expanding this investment portfolio, but am unsure of how to do that.

So, my question for the more experienced investors out there is - what should I do next?  Should I hold the property and wait to save enough $ to buy another one (due to high property values in the area this may take several more years)?  Or should I try and use the equity in this property to help buy something else?

I don't know for sure, but I think it will be hard to find something in the Brooklyn/NYC area that would command rental income high enough to offset the interest on a HELOC (I'm estimating around ~1K/mo) in addition to the regular mortgage payments and expenses. It seems like mortgages have outpaced rents over the past 5+ years or so in this area.

I'd appreciate any advice from the community!

Following this... To piggyback on your question, what's your feeling about Bklyn multifam buildings going up in value another 5y? I hear ppl saying the bubble is about to burst. I've been hearing about it for at least 5y now but prices have just kept climbing. Buying an $800K property seemed nuts only a couple of years ago, but now they're going for $2M+.

@Jeremy Pastore   I think that it might be hard to buy in Brooklyn but you might be able to buy something elsewhere.  Ultimately it comes down to what you are going to do with the money.  If you have a place to put it that generates a return greater than the cost of the money then it makes sense to pull out some equity however you do need to account for risk.  And there is something to be said about a low leverage portfolio.  

Another option might be to sell the property and 1031 into something bigger that gets a better overall return.  However before you do anything you should determine what type of property you want to buy and how likely finding that property is.  

Good luck

Originally posted by @Jan Kutrzeba :

Following this... To piggyback on your question, what's your feeling about Bklyn multifam buildings going up in value another 5y? I hear ppl saying the bubble is about to burst. I've been hearing about it for at least 5y now but prices have just kept climbing. Buying an $800K property seemed nuts only a couple of years ago, but now they're going for $2M+.

My hunch is that Brooklyn will continue to go up as long as the S&P 500 doesn't tank (NY real estate is very closely linked to the finance industry and bonuses).  So the real question is - is the equity market bubble about to burst?  Probably not for a bit with all the stimulus floating around right now.  Will it last 5 years?  I doubt it.  Maybe a couple.

Originally posted by @Jeffrey Holst :

@Jeremy Pastore  I think that it might be hard to buy in Brooklyn but you might be able to buy something elsewhere.  Ultimately it comes down to what you are going to do with the money.  If you have a place to put it that generates a return greater than the cost of the money then it makes sense to pull out some equity however you do need to account for risk.  And there is something to be said about a low leverage portfolio.  

Another option might be to sell the property and 1031 into something bigger that gets a better overall return.  However before you do anything you should determine what type of property you want to buy and how likely finding that property is.  

Good luck

Thanks Jeff. 1031 is an interesting option I hadn't thought of - seems like a pretty clean way of leveraging that equity up.  Eventually I would like to get into small (2-4 unit) multi-family in the NY market, but those don't come cheap.  Do you like that approach better than buy and hold?

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you