SFH homes dropping in Long Island NY?

Question

Hey BP!

Hope you all are safe. How low, in your opinion, will SFH in Long Island NY drop (average %) these coming months?

Craig Schneider · Answer

When you run your long term numbers make sure vacancy/bad tenant cost is higher since evictions are getting harder by the month.  Courts are backed up and the Sherriff typical only does 2 evictions a day.

Luchiano Nivar · Answer

@Jorge Rivera

Hello Jorge, I live out here in Long Island.

I’ve been looking to get my first deal going.

Looking to do BRRR. This is great insight.

Craig Schneider · Answer

Jorge.  Unfortunately,  we are entering an unknown.  Depending on your cost to hold the house it might be wise to take the profit and get ready for a new deal.  On my end, I have softly marketed my single-family rentals.  We have been successful in going to contract on 2 of the 6.   Good luck!!!

Marcello I. · Answer

@Jorge Rivera

My guess would be about 10%. Then again maybe not at all.  Supply is extremely low and city dwellers are migrating towards the suburbs which are perceived as safer and more stable in light of COVID-19.

Kevin Paulk · Answer

@Jorge Rivera With 26 million plus Americans out of work right now, the U.S. consumer sentiment hitting its lowest since the recession of 08' and banks tighten up on lending requirements. My guess is we haven't seen nothing yet. I would sit on the sidelines and slowly try to make sense of it as the months go by. To early to jump in.

Jorge Rivera · Answer

@Harry Neal

Purchase price 310k

Rehab 60k

ARV 450K

80% refinance

Im adding an additional bedroom and bathroom to reach that cash flow. Hope this helps.

Jorge Rivera · Answer

@Luchiano Nivar this is what BiggerPockets is all about!

Jorge Rivera · Answer

@Marcello I. Great info. I’ll lower my rental expectations. My goal is to house a section 8 tenant to lower the likelihood of vacancy, but still factor in the worst case scenario. My cap ex and maintenance are 10% total, given that my father is a contractor to lower costs when they do happen. I’ll bump that into 15% to be safe.

Marcello I. · Answer

@Jorge Rivera

Forgot to ask... Are you budgeting for cap ex and maintenance ? Depending on your tenant pool and tenant turn over you should budget accordingly for maintenance and cap-ex.  Both of my properties are located in B class areas and I budget about 15-20% for cap ex and maintenance.  I have found this to be my sweet spot for my specific properties.

Keep in mind, this is not taking property management and vacancy into account.

I also 100% agree with @Craig Schneider in assuming higher vacancy rates during this time.

Marcello I. · Answer

@Jorge Rivera

I think if you are investing for cash flow then based on what you are saying it sounds like a good deal.  If you look at rental rate data during the 08 recession rents slightly dipped in the following years but was fairly stable.  If the deal pencils out assuming a modest drop in rents , then in my opinion it would appear to be a good deal.  Additionally, regardless of an economic downturn, I always recommend assuming conservative rents.  For example , I own a property in Indianapolis that on paper “should” have rented for $1200 but $1135 wound up being the right number.  But that was ok for me because I had already priced in the possibility of receiving lower rents.

In regards to the BRRRR strategy, remember that accurately calculating ARVs on Long Island like in most places is highly dependent on location.  For example, I own a property that I know would have appraised about 10-15% higher if it were not located on a busy road.

If you are banking on appreciation or an ARV that will support the BRRRR strategy I would suggest doing your homework on property values for similar properties in the immediate area. When I say similar I mean similar square footage, similar finishes, similar layout in the immediate area.  If it were me, I would also not purchase the property unless I was comfortable with the possibility that you may not be able to refi all of your money back out and that rents may be slightly lower than what you expect.  Also consider that banks will be tightening up their lending criteria.

SFH homes dropping in Long Island NY?

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