NYC Owner Looking to Put Equity to Work

NYC Owner Looking to Put Equity to Work

Investor · Denver, CO · Member since 2015 · 29 posts · 19 votes

Hello BPers,

I'm a former real estate agent. My current job is taking care of my kid and trying to make my house make me more $. My goal is financial independence for my family in 5 years. We live pretty simply, so we don't need huge money to be financially independent.

I own a two-family home in Brooklyn, NY. I've made it pay its mortgage and expenses this year by Airbnbing the second floor apt. We live on the first floor.  Thanks to crazy appreciation here it's probably worth 1.3mil. Mortgage is 415K.

My question is: how would you use this equity?

My thought has been to 

1) Pay down mortgage and cash out (my old broker would hate this idea. He never paid down anything. "Appreciation will do it for you!") 

2) Invest in out-of-state turnkey buy-and-holds. Where? 

Question: If I use a HELOC to buy cash-flow properties, is it possible to find houses that I can refi after repairs and get all or most of my $ back and that will still produce income?

I'm excited to be here. 

Jennifer C. 
Brooklyn

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Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
11y
Originally posted by @Account Closed:

Welcome! I live in CA but invest in more affordable markets, so I know the feeling. ! :)

 To the original poster, I would say that you should be very, very careful about the contacts that will now be coming your way.  For example, chances are extremely high that you will be contacted by a particularly persistent marketer named Joe Pickett.  He may use other names, and may even post claiming to be a California investor, but using a photograph lifted from the linkedin profile of a PeopleSoft engineer in Ohio.  Whatever you do, DO NOT TAKE ANY ADVICE FROM JOE PICKETT!

See this reply in the discussion

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  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    @Jennifer C.

    welcome to the site. Congrats on making the house work for you.

    If you are looking for low cost rentals out of state the midwest provides the lowest barrier to entry.

  • Developer · Ottawa, Ontario · Member since 2014 · 212 posts · 169 votes
    11y
    Jennifer Castle as I'm sure you've heard, short term rentals like AirBnB are under assault by the city for non-payment of hotel tax. If the city wins (good chance) the short term rental industry will crumble. I know there has been talk of a negotiated settlement with AirBnB. But I'm not sure of the status. Before you borrow additional funds, make sure that your business plan is built on a sustainable foundation. It could turn into a house of cards if you're dependent on the AirBnB income for survival.
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @Jennifer C.:

    Hello BPers,

    I'm a former real estate agent. My current job is taking care of my kid and trying to make my house make me more $. My goal is financial independence for my family in 5 years. We live pretty simply, so we don't need huge money to be financially independent.

    I own a two-family home in Brooklyn, NY. I've made it pay its mortgage and expenses this year by Airbnbing the second floor apt. We live on the first floor.  Thanks to crazy appreciation here it's probably worth 1.3mil. Mortgage is 415K.

    My question is: how would you use this equity?

    My thought has been to 

    1) Pay down mortgage and cash out (my old broker would hate this idea. He never paid down anything. "Appreciation will do it for you!") 

    2) Invest in out-of-state turnkey buy-and-holds. Where? 

    Question: If I use a HELOC to buy cash-flow properties, is it possible to find houses that I can refi after repairs and get all or most of my $ back and that will still produce income?

    I'm excited to be here. 

    Jennifer C. 
    Brooklyn

    Hi Jennifer,

    Well done on your success and huge equity gain thus far.

    I am a firm believer in building the foundations of a portfolio with cash and once a certain cashflow amount is pouring in each month, then leverage can come into play for diversification along with speeding up the growth. With that being said, I would go for the "pay down and cash out".

    Definitely check out the Midwest. Some amazing cashflow deals around.

    My top picks are - Ohio (I'm bias with that one lol), Michigan and Indiana.

    Thanks and have a great day.

  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    11y

    @Jennifer C.

     - Welcome to BP!  I cashed out of some equity last year and went into a cash flow market buy buying 15 buildings in less than a year.  I would first establish a relationship with a TK provider / partner you trust.  IMO the most important thing is finding a TK provider / partner you can trust.  The market you choose is secondary.  I say that because a great PM in a ok market will outperform a ok PM in a great market.  I would start small, buy 1 property with them, 6 months later buy another.  After a year if things go well I would sit down with them and put together a short term goal.  Figure out how many houses you need, how much it will cost, and pull out that cash and use it to leverage properties.  

  • Investor · Denver, CO · Member since 2015 · 29 posts · 19 votes
    11y
    Originally posted by @Victor Menasce:

    Jennifer Castle as I'm sure you've heard, short term rentals like AirBnB are under assault by the city for non-payment of hotel tax. If the city wins (good chance) the short term rental industry will crumble. I know there has been talk of a negotiated settlement with AirBnB. But I'm not sure of the status.

    Before you borrow additional funds, make sure that your business plan is built on a sustainable foundation. It could turn into a house of cards if you're dependent on the AirBnB income for survival.

    Thanks for your advice Victor. I'm pretty risk-averse, so I won't make an plans based on the Airbnb income. If the city does get their way, however, Airbnbers who can charge enough will still be able to make it work--and I'm in that category. Also, because I'm in an owner-occupied 2-family, my Airbnb is completely legal. 

  • Investor · Denver, CO · Member since 2015 · 29 posts · 19 votes
    11y
    Originally posted by @Brie Schmidt:

    @Jennifer C.

     - Welcome to BP!  I cashed out of some equity last year and went into a cash flow market buy buying 15 buildings in less than a year.  I would first establish a relationship with a TK provider / partner you trust.  IMO the most important thing is finding a TK provider / partner you can trust.  The market you choose is secondary.  I say that because a great PM in a ok market will outperform a ok PM in a great market.  I would start small, buy 1 property with them, 6 months later buy another.  After a year if things go well I would sit down with them and put together a short term goal.  Figure out how many houses you need, how much it will cost, and pull out that cash and use it to leverage properties.  

     This sounds like really solid advice Brie. Thank you so much.

  • Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    11y

    @Jennifer C. also knows what she is talking about and her site is a good source of information. Investing from NYC in other markets is fraught with landmines so even if you get a little lower return having someone you can trust makes all the difference in the world at least in my opinion. 

  • Investor · Fayetteville, NC · Member since 2014 · 916 posts · 190 votes
    11y

    Welcome to BP @Brie Schmidt

  • Investor · Denver, CO · Member since 2015 · 29 posts · 19 votes
    11y

    @Charles Worth 

    Thanks. Sounds like more good advice. Yep, I was just doing the math on the HELOC and it looks good. I'd love to hear about your experiences and hear about pitfalls to avoid. I'm very unclear about what markets to look to. I wish I could do more hands-on work here in the city. It's fun for me.

  • Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    11y

    @Jennifer C.

    I don't know I feel like a lot of stuff in NYC is much tougher even if you have the money. I mean with rent control, apartments that have an HOA or Co-op board and housing that needs to be 100% effecnticly used I just feel its more a business here in NYC.

  • Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    11y

    Also I connected with you on here to talk. 

  • Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    Hey Jennifer!

    I live in LA and have always bought turnkeys out-of-state for myself. If you do go the turnkey route, you won't have to worry about refi after repairs or any of that because there won't be any repairs needed on the property(ies). In terms of where to find them, it all depends on when you buy. Good markets change depending on where they are in the buying cycle. Right now, and close to you, Philly is a big market for turnkeys. That may be one worth checking out because you could drive down and view the whole operation in person and get a feel for how it works. Another big one is Birmingham, and some others are Houston, Dallas, Chicago, Indy...

    Financing-wise, I've always a fan of leveraging what I can, but everyone's comfort levels are different. You can buy turnkeys with traditional mortgages, of which you can use with the HELOCs and such. The key to any of this is to work with a truly investor-friendly lender. If you don't, nothing will go through (personal experience). 

    Ali

  • Investor · New York City, NY · Member since 2014 · 370 posts · 85 votes
    11y

    Welcome aboard.

  • Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    11y

    @Jennifer C.

    Hi and welcome to BiggerPockets! It’s a great place to learn more about investing and meet the people you want to meet. If you haven't yet, be sure to check out the The Ultimate Beginner's Guide to Real Estate Investing and don't forget to set up your Keyword Alerts!

    I am an investor in turnkey out of state properties, and do use leveraging for all buy and hold properties I currently hold.  Markets I like include Philly (especially since it is close to you) , Birmingham, Indianapolis and Kansas City.

  • Memphis, TN · Member since 2013 · 969 posts · 524 votes
    11y

    @Jennifer C.

    Welcome to Bigger Pockets!! I am sure you will find a great place to invest... Do your Due Diligence!!

  • Investor · Brooklyn, NY · Member since 2015 · 127 posts · 57 votes
    11y

    @Jennifer C.

     Welcome to BP! Congrats on the appreciation. I don't know what the interest rate on your mortgage is, but with rates still around 4% and an interest rate hike probably in our near future, I'd look into a cash-out refinance if your original interest rate is higher than 4%. As far as what to do with that equity, well, I was and still am kind of in the same boat as you! We recently tapped the equity on our first investment property to act as a down payment on a multi-family in Brooklyn, and we are planning to tap the equity on another property soon. Deciding between another multi-family (all the eggs in one basket) or several smaller turnkey properties. Probably a mix of both.

    Good luck! Will be curious what you decided to do.

  • Santa Clara, CA · Member since 2015 · 66 posts · 28 votes
    11y

    Welcome! I live in CA but invest in more affordable markets, so I know the feeling. ! :)

  • Investor · Denver, CO · Member since 2015 · 29 posts · 19 votes
    11y

    @AdamK

    What/where did you buy in BKLYN that makes sense? I'm seeing things in Bushwick/BedStuy that could have flip or long-term potential. Truthfully I'm itching to do flips.

  • Investor · Brooklyn, NY · Member since 2015 · 127 posts · 57 votes
    11y

    @Jennifer C.

    I house hack and have a multi family in Prospect Lefferts Gardens.

    I know nothing about flipping other than it takes a lot of money to rehab the brownstones/limestones in bed stuy. And except for the far eastern parts of bushwick/bed stuy, it's a bit pricey for me.

  • Investor · Denver, CO · Member since 2015 · 29 posts · 19 votes
    11y

    Gee. It appears that we are neighbors in PLG. 

  • Involved In Real Estate · Brooklyn, NY · Member since 2014 · 57 posts · 7 votes
    11y

    Hello @Jennifer C.

    Welcome to BP! 

    I am relatively new to the site too, and I'm also from Brooklyn) 

    the markets I am interested in are Phildelphia, Kansas City MO, Birmingham AL, and I am looking at turn key investments, like a few here had suggested to you already. 

  • Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    11y

    Welcome to BP @Jennifer C.

    All the best!

  • Investor · New York , NY · Member since 2015 · 7 posts · 0 votes
    11y
    Jennifer. I'm also in nyc and just started doing some investments in Westchester because it's close and cheaper, though appreciation not as great. But taxes kill me. I've previously invested out of state and open to doing again. I used to be an agent too. PM me if you have any interest in discussing, brainstorming ideas or even meeting up.
  • Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
    11y

    @Jennifer C.

    Another approach is to think about markets outside Brooklyn that you are familiar with.  Where did you grow up?  Where did you go to college?

    There are many good operators in these forums, but if you have people you trust in markets you are already familiar with, that might be a good place to start with out-of-area investments.

    Seeing these Brooklyn numbers is crazy.  I lived there in the nineties near the Atlantic Yards if they still call it that (Boerum Hillish).  Park Slope, Brooklyn Heights, and Carroll Gardens were the only established Manhattan "suburbs".  Ft Greene, Red Hook, and Clinton were still affordable (and scary) while Dumbo, Greenpoint, & Williamsburg were just getting trendy.  I wasn't in real estate then and couldn't afford any of the opportunities I was seeing, but am kicking myself now.  That being said, how far behind can Bed Stuy or even Bushwick be?  Particularly with Bed Stuy's gorgeous brownstones?

    I'm jealous (and a little nostalgic) of your options.

    Good luck.

  • Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Account Closed:

    Welcome! I live in CA but invest in more affordable markets, so I know the feeling. ! :)

     To the original poster, I would say that you should be very, very careful about the contacts that will now be coming your way.  For example, chances are extremely high that you will be contacted by a particularly persistent marketer named Joe Pickett.  He may use other names, and may even post claiming to be a California investor, but using a photograph lifted from the linkedin profile of a PeopleSoft engineer in Ohio.  Whatever you do, DO NOT TAKE ANY ADVICE FROM JOE PICKETT!

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