Newbie from NYC thinking - what can I do with $225K?

14 Replies

Hi BP community,

    My name is Sandra and I'm a new BP podcast fan and just joined recently, as in last week! I've started listening to the podcasts from the beginning, and I especially appreciate how Josh and Brandon support getting more women involved in the community. So here I am.

    I could use some advice on which option would give me the most upside and be smartest for the long term given my goals to achieve passive income in 7 years that amounts to $20K per month. A crazy goal, but I figure that would allow me to retire very comfortably! Let's assume I have $225K cash to play with and can afford to spend up to $5K total a month to cover both any investment and my rent, but I live with someone who can pay some of the rent. I work in Manhattan and like living in the city, so living in the suburbs is not an option...yet. 

 Among the choices to get started building my portfolio are to:

  • Buy a small apartment outside the city to become a landlord and keep renting in the city.
  • Buy a small apartment in the city and a small second house upstate that I can rent out occasionally (or not at all).
  • Buy an apartment here in Manhattan that offers live/work occupancy so my partner can work from home and pay me his office rent (so he'll be better off as well).

    I'm reading books and just signed up for my first networking event, but I would love any and all advice from the BP community to give me a head start! If not, I just wanted to introduce myself and say hello and thank you for all the advice already on here.

Best,

Sandra

    A lot of things. Depends how involved you want to get. One way is to partner up with someone - you finance it, they flip it or manage it on the ground. One group I know is a person with $$, a realtor and a mortgage person. Say you buy a $300,000 house - you'd put the 25% down payment up. The mortgage broker gets the best rate on the other 75% and contributes his commission. The realtor finds the best house in the best market and contributes his commission (plus when/if you sell it). It might be a good way to ease yourself because between the real estate agent and broker, you'd have the local RE knowledge and learn through the process.  They're also on the ground to manage and screen tenants. The key is finding the right people to do it with. 

    For my money, personally, I would go on my own and buy two properties in West Hartford for ~$400K each. So you buy $800K total. There's an affluent professional market (big health insurance market and hospitals) here between Avon, Farmington, West Hartford and Simsbury and the rents are going up - especially in certain areas of WH. So you put $100K into each and finance the other 75% with $300K each. Say you get gross rent of $8K, the mortgages are $5K, and after maintenance, repairs, cap-x you clear, conservatively $2K/month. About a 12% ROI. Plus you pay down, what, $10K in principle each year. I mean that's just me.

    Maybe areas closer to you then. I have one client who picks up 250-300K condos in Stamford. She's on her fifth now. Basically every year she takes her annual bonus and puts a down payment, then rehabs it. From the cash-flow she gets from the five units, it's put her in a good position. I'm not a huge fan of condo investments myself (your investment is at the health and whim of an HOA) but maybe that's a more scalable option for you. One thing, if you want to get into buy-and-hold, is to think about what you want to buy (single family, condo or multi-family). Also a good program to look into is Fannie Multiple Financed Properties - you can build a portfolio of up to 10 properties with 20-30% down, with loan amounts up to 400K+ depending on what town/city.

    Hey Sandra, 

    Welcome to the community. I also work in New York and am interested in Real Estate. My situation is a little different, but being born and raised outside of Atlanta, I actually just brought my 2nd single family in the outside Atlanta area. So maybe investing afar could work?

    Also if in the city option feel free to reach out for coffee. Making it my Goal in 2016 to meet more NYC investors and expand my network 

    Sandra C. 

    Sandra C.

    Welcome to the vibrant BP community, where you will find like minded individuals committed to REI and also helping others succeed.

    I added some links on rentals and sense this is the niche you are looking to focus on, while pondering which option to use to get started with inputs from the BP community. 

    http://www.biggerpockets.com/renewsblog/2013/01/04/how-to-rent-your-house/ (house rental guide)

    http://www.biggerpockets.com/renewsblog/2013/02/22/buying-rental-property/ (how to buy a rental property)

    Your time on this social media site will be well spent.

    You have taken the 1st step by announcing your readiness and commitment to embark on a REI career.

    Whether you pursue, wholesale, rehab & fIip or buy and hold it's up to you to decide.

    The bottom line is that you must take action to start.

    Don't get bogged down with analysis paralysis. You must take risks, but, ensure that they are calculated risks.

    Below are some links to get you started.

    https://www.udemy.com/biggerpockets-real-estate-investing-course/ (video with 64 lectures and approx 6hrs of material)

    https://www.biggerpockets.com/real-estate-investing (Ultimate beginner's guide to REI)

    REI books suggested by BPers

    https://www.biggerpockets.com/renewsblog/2015/11/13/7-real-estate-books-beginner-investors/ (7 absolute must read books for beginner REIs)

    http://www.biggerpockets.com/renewsblog/2013/04/14/best-real-estate-books/?utm_source=search&utm_medium=internal&utm_campaign=books (books recommended by BPers)

    Before making your 1st REI purchase please visit the link below for some useful tips

    https://www.biggerpockets.com/renewsblog/2014/12/19/real-estate-investing-success-smart-tips/

    Simply, bone up on the areas that you need to expand knowledge in such as, Forums, Marketplace, Learn, Network, Analyze and Resources.

    Feast on the Podcasts, #askbp Podcasts, blogs and webinars

    Lastly, this site thrives on interactions and as such we encourage two way exchanges and look forward to educational and thought provoking ideas relevant to REI.

    Sandra C.,

    Thank you for posting. I too am living in Manhattan, joined this community a week ago, and have roughly $200k to invest into my first real estate investment. I will continue to follow this thread. We should also trade notes the more we learn. Feel free to DM me if you want to sync up.

    Best,
    Ron

    Sandra C.

    Hi Sandra,

    Welcome to the BP Community and kudos to you for starting your investment career. With your starting capital you have a lot of options and it's great that you already have a long term goal in mind. I specialize in working with investors in the NYC area, to find them adequate properties, acquire them, and rent out the units free of cost to the owner. Please feel free to pm me with more details and I am sure I can be of help to you achieving your passive income goal of $20,000 per month

    Be well,

    Tim

    Thanks 

    @Ron Garrett

    @Linval T.

    @Timothy Reeb Jr

    @Chukwudi Motanya

    @Ryan Gillette

    for the replies -- I definitely appreciate it.

    Also open to ideas for where to buy that's in the area (1 hour away by train max)...

    Just started reading John Schlub's book "Building Real Estate Wealth in a Changing Market" and like the idea of slow and steady even if that changes my timeframe.

    Looking forward to becoming more active and learning the ins and outs of posting and replying. : )

    Best,
    Sandra

    best thing you can do is try to buy 2-4 units, owner occupy and rent out the others. Look for up and coming areas in Brooklyn, Queens, etc. that you can afford and so you can still commute to Manhattan to your work. Key is finding the right gentrifying areas. You'll build equity and learn how to manage tenants first hand. Then in a few years you can pull your equity and buy another property. 

    Living in NYC is like living in SF Bay Area. Most peeps on BP live in much cheaper areas, are used to the 1 or 2% rule (useless in SF and NYC btw) but don't get nearly the same appreciation. It's a different animal, and you need to intimately understand your specific market dynamics.  Owner occupied 2-4 is the best first step IMO. 

    @Ryan Gillette 

    I would be careful in West Hartford market.  Prices are through the roof, and the #'s don't work if you are strict with your rates of return.  If you spend $400k on a multi, you would not even meet the 1% rule, let alone the 2% rule. Unless, you can get a deal off market of course :-) But I have a feeling that everyone and their mother sends letters regularly to all MF owners, which gives them even more power to increase their prices.  As a loan originator, Ryan, you probably see appraisals and deals happening all over the place, which can work for "value," but the rental income doesn't add up.

    My opinion is to simply stop renting and buy a place to live in. Unless you are getting cheap rent via rent control, you can plow all that rent money into a mortgage. 30 yr conforming is about $500/month per $100k borrowed. You also get the interest deducted so IRS will pay about 2 months for you each year in the beginning. You can probably find a good deal this winter. My best deals are in between Thanksgiving and April Fool's. You get rich by investing in equity appreciation in NYC then use HELOC to get those high rent ratio properties far away.

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