The masterplan, seeking advice

5 Replies

Hi ladies and gentlemen,

I am here requesting some advice from you all to help me finalize this so-called "master plan" I have. So this sort master plan I have is to get started in real estate investing within a year, and for those of you who seen my intro post, I do have some knowledge on the subject and this is the plan I’ve pieced together.

First is to get find a good deal on a multifamily residential, get financing, and move in. For the multifamily house, it will either be duplex, triplex, or fourplex (I prefer the latter to minimize the risk of high vacancy rates). I seek to accomplish this is by being an owner-occupant, and hopefully achieving an FHA loan for little money down, as I am not starting with a huge bankroll.

Next is to ‘househack’ for a few years,

Then either sell and upgrade to either a small multifamily apartment building or keep the property’s cashflow (hopefully there is some, my market is tough - but doable with the right deal) and invest in another residential multifamily with other money.

A few questions and concerns I have though are as follows:

  • 1. I live on Long Island and needless to say, the prices for homes are incredibly high. This in turn negatively impacts the cap rates, which are (from what I’ve seen) pretty low. My question is, do I keep my master plan or invest out of state (which can be tougher and I am sure will be) where I will be able to purchase homes for a lot cheaper than here in New York and get a better cap rate?
  • 2. Besides the obvious statistics, what do you all look for when investing in NEW (to the investor) neighborhoods? Crime rate, median renter age, etc?

Any input is greatly appreciated. Thank you for taking time to help a future investor out, I’ll be sure to return the favor here on BP!



There are two ways to approach the issue of terrible cap rates due to living in a desireable area. You can avoid investing in rentals and multi fams entirely, and stick to flips. Or you can ignore the naysayers on BP who brag about their cap rates in the midwest, and invest in New York rentals anyway. Low cap rates do not necessarily imply that you can't have cash flow.

You can cash flow by renting out a newly purchased one bedroom condo in LA, no problem (as long as you don't use too much leverage). If you couldn't, then there wouldn't be so many people renting out condos.

It is true that if you lived in Pittsburgh, your cap rates would dwarf the cap rates in LA and New York. But it doesn't have to be a pissing contest with everybody saying, "My cap rate is bigger than yours, bro!"

If you can cash flow enough to live in a multi fam for free, then you've successfully house hacked. Don't let our little cap rates bring you down. Be proud to live in an area that is so expensive. Clearly everyone who isn't an investor prefers New York and LA. :) Because of that we have some of the lowest vacancy rates in the country, and by far the highest rental demand.

Also you live in one of the best parts of America to become a real estate agent.

@Scott R. you raise good points, and I appreciate your help. I will look into flipping but I am not entirely sure I will have the cash to finance, but it is worth a shot. As far as cap rates go, you're right when you say as long as I'm successfully house hacking and having some cash flow it is still good. 

Thanks again!

It would be hard for you to house hack in another area without relocating, I think deals can be found within a short drive from just about anywhere.

Honestly you have to decide on your investing goals and stick with it, if you can get a 7% ROI in an area where you will get really good tenants and have possible appreciation then that sounds like a decent investment.

I have properties that are in great areas (of Pittsburgh) that get me 10-15% ROI each year and I have properties in not so great areas that get me 20%-30%+ but then then tenants are a more pain in the rear.

This guy at my gym just told me he lived in Jersey for 20 years bought a condo for 80k and sold it for 700k, you probably won't find that in Pittsburgh lol.

Good luck and let me know if I can help in anyway.

@Ian Hoover I would completely fine with a 7% ROI, with good tenants and possible appreciation. Can you suggest any other statistics I could look into so I have some reassurance the neighborhood isn't on the decline? I'm not looking to spec invest, just want to have some knowledge that the area is a good area and is looking up. Besides the above mentioned stats, anything you would suggest looking into?

Thanks Ian!

You can check out crime rates and if there is any development going on in the area.

Do a drive by and get a feel for the neighborhood too, normally your gut will tell you if things areally right.

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