Multi-Tenant rental advice for a newbie
I am considering purchasing and renting out several small units as a passive (part-time) hobby.
This website gives great advice for starters but it seems very difficult to find reasonably priced properties in my area New York City/NJ.
Does it make sense to get property in another state and rely on a management company to maintain it?
Any suggestions on how to find anything like 4-units or less in NY?
Any ideas would be GREATLY appreciated.
My dad bought property in NYC in 1963, and I started investing in NYC in 1983. There are extreme peaks and valleys in prices, and currently it's at a peak. The last downtown started in 2006, was brief, lasted to 2008, and resumed its upward spiral.
I went through the cycle before that, prices peaked in 1986, bottomed out in 1993, till it peaked in 2006. Based on past experience, bottom to peak runs about 10-12 years.
Unfortunately, it's virtually impossible to cash flow in most areas today. It was also difficult in the 80's and I did look out of state, mainly in PA. However, back then, both me and m wife had high income W2 jobs, and concluded we could not do it part time as a hobby. So with my mom in law, we invested a total of $150K in three short years, and with a healthy cash down, we manage to cash flow from the start. The first 2 properties was within 20-30 minutes driving distance. With such an investment on the line, we cannot treat in as a hobby.
We were fortunate we ran out of money to invest by 1984, and when the market crashed in the late 80's, we held off. When the bottom came in 1992, 1993, we picked up foreclosures, including the home we live in. Picked up condos in foreclosure in MA, and had my sister manage it. So all of our properties are self managed.
One other thing I noticed is several investors I know lost big time picking up properties in the late 80's, as the crash came, and they each lost over $100K between negative cash flow and dropping property values. In the crash of 1986-1993, 3 families dropped from $350K to $275K. In the 2006-2008 period, 3 families dropped from $850K to $650K, but zoomed to $1.2 million this year.
So the key to survival is to put enough down to cash flow, and not treat it as a hobby, so you survive the downturns
New here too!
I’m from Brooklyn too. I know how you feel. It’s really hard here to invest in property. I bumped into a great BP podcast yesterday by David Greene podcast 257. “But my market is too expensive” He has a book too. I just ordered it on Amazon. I can’t wait for it to come in.
I’m looking to invest in Miami Florida.
Thanks for the market history. I can definitely see this bubble bursting. It was hard finding a second property after 2012 as prices started to sky rocket.
Although ,properties may eventually drop here I’m at a point where I’d rather be in a location where landlords are favored.
Josephine, Thanks for your comments. From what I hear and see and from family in the business, NYC rentals is difficult to start these days but I was thinking of Philadelphia or New Haven CT as a small 4 unit investment. Will keep looking and digging till it works out.
Im glad some people in your area are able to help with the pricing side of stuff. I want to hit on a bigger issue in my opinion. You called it a hobby. That is a very bad mind set to start this. If you treat the rental property as a hobby you will treat the tenants like they are friends and as a hobby. This leads to failure pretty much every time. You need to change your mind set before jumping in with such a large investment.
I believe the single biggest cause of failure in this field is new land lords treating the process as a hobby. It is very much a part time job. You need to run it as a business from day one.
If the property cash flows well enough to cover the cost of PM then its fine. I personally like keeping my properties. You can likely manage it from a few hours away if you can find a trusted hand man to call when issues arise.
Gordon, you are correct. hobby is the wrong word to use. I meant part-time as i own and operate another (non real estate) business that takes up half of my work week.
@Josephine Giordano Miami - South FL is a very tough market right now but you will find deals to cash flow on in either Miami or Broward. Nothing can compare to NYC real estate that's for sure.
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