Expanding real estate portfolio after NYC purchase

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Expanding real estate portfolio after NYC purchase

Phil Li
Member since 2020 · 10 posts · 5 votes

Hi everyone. I am seeking advice on how to expand my real estate portfolio. I purchased a house in South Brooklyn NY last year with my wife and I am looking to purchase more property for rental. We put about 40% down on a 1.1mil 2 family house and we are looking into buying rental properties in other states. We're currently renting out the other unit for the house we live in which covers about half of the mortgage payments every month, allowing us to save a significant amount of money from our full time jobs. 

We currently have 70k in cash saved and ready to invest. However we would like to use as little of our own cash as possible for this venture. We looked into the BRRRR model and it seems feasible if we get a HELOC given the large amount of equity we have in our current home. However, neither of us are experienced in the BRRRR strategy and we're not sure how to go about finding off-market fixer uppers in other states (NJ, PA, CT). If anybody has advice on a first time BRRRR given our current situation it would be greatly appreciated!

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Krista Kennedy
Member since 2019 · 25 posts · 19 votes
4y

Hi @Phil Li congrats on the purchase in BK! I've posted on a couple of other BP threads about my house hack in the Ditmas Park / Flatbush area. I'm now investing in Baltimore City. Closed on a triplex last fall, did a small reno, and my PM is placing tenants this month. My next one will be a proper BRRR. Let's keep in touch!

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  • Krista Kennedy
    Member since 2019 · 25 posts · 19 votes
    4y

    Hi @Phil Li congrats on the purchase in BK! I've posted on a couple of other BP threads about my house hack in the Ditmas Park / Flatbush area. I'm now investing in Baltimore City. Closed on a triplex last fall, did a small reno, and my PM is placing tenants this month. My next one will be a proper BRRR. Let's keep in touch!

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  • Seth Hochberg
    Member since 2020 · 120 posts · 135 votes
    4y

    Congrats Phil! I was born in raised in Bay Ridge, Brooklyn, so probably not too far from your home. 70K plus any equity you can grab from a HELOC will get you pretty far in plenty of areas. I currently invest in Baltimore, but I would be wary of investing there without being intimately familiar with the place - at the very least, you should finding someone there (eg an agent) you can fully trust. But it doesn't sound like you were interested in that area anyway.

    Since I can't speak to any other areas, I would recommend spending lots of time on RedFin/Zillow to get an idea of what areas match the price point you're looking to invest in. You can ask on a public forum, but it completely depends on what your price point is. Are you looking to invest in million dollar homes or 200k homes? And then most people only know where they invest. I would scour BiggerPockets, entering the cities/towns that you might be interested in and see what people are saying. You can ask here, and someone might enthusiastically exclaim, "INVEST HERE!" but how much credence does that have - how much should it have? Once you find people who invest in areas at your price point, then perhaps you should initiate, network, and see if the area makes sense. 

    Best of luck. If you have any BRRR-related questions, independent of location, I'm happy to answer them.

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  • Phil Li
    OP
    Member since 2020 · 10 posts · 5 votes
    4y
    Originally posted by @Seth Hochberg:

    Congrats Phil! I was born in raised in Bay Ridge, Brooklyn, so probably not too far from your home. 70K plus any equity you can grab from a HELOC will get you pretty far in plenty of areas. I currently invest in Baltimore, but I would be wary of investing there without being intimately familiar with the place - at the very least, you should finding someone there (eg an agent) you can fully trust. But it doesn't sound like you were interested in that area anyway.

    Since I can't speak to any other areas, I would recommend spending lots of time on RedFin/Zillow to get an idea of what areas match the price point you're looking to invest in. You can ask on a public forum, but it completely depends on what your price point is. Are you looking to invest in million dollar homes or 200k homes? And then most people only know where they invest. I would scour BiggerPockets, entering the cities/towns that you might be interested in and see what people are saying. You can ask here, and someone might enthusiastically exclaim, "INVEST HERE!" but how much credence does that have - how much should it have? Once you find people who invest in areas at your price point, then perhaps you should initiate, network, and see if the area makes sense. 

    Best of luck. If you have any BRRR-related questions, independent of location, I'm happy to answer them.

    Hey Seth thanks for the feedback! Yeah I totally agree that I should tunnel in on the areas I want to invest in. I’m mostly looking into deals that are in the 150-500k range.

    I think without having done a BRRRR it's pretty hard to get started on your first one. Specifically with deal evaluation because costs are hard to predict and how do we make sure we get the ARV correct? Appraisers can be stingy with their numbers.

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  • Seth Hochberg
    Member since 2020 · 120 posts · 135 votes
    4y

    Yes. Having done a grand total of one BRRRR, I would say the two hardest parts for beginners are estimating renovations and estimating ARV's.

    For estimating renovations, I read J Scott's book, "The Book on Estimating Rehab Costs". This is a great starting point and a helpful mental model of how to think about renovations. But nothing compares to having an agent who knows how to do this. The most important step is finding a quality agent that has done many BRRRR's before. You walk through a property and you let him/her point out everything that needs renovation and you ask questions at every step of the way. Oh it needs a new exterior door? How much do you think that'll cost? And you write it down! Oh, a new HVAC system with duct work? How much will that run me? And after you've viewed a couple of properties, it'll all come together. Lots of patterns will emerge. But take notes because you will forget.

    For estimating ARV, I go to Redfin/Zillow. I look at homes sold in the last 6 months. I match the number of bedrooms and bathrooms. I roughly match the square footage. And I zoom into the neighborhood of interest. And look at every house in the neighborhood. How are they comparing? Look at the pictures? Are there low ARV's, but the houses look pretty? That's a bad sign. It's not an exact science. You can also ask an investor friend your area to share an appraisal document. And you should pour over that document to understand it. Understand the different class types (C1, C2, C3, etc). How much is a brand new kitchen worth in an appraisal? Etc.


    Hope that helps.

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  • Zee Abbas
    Contractor · Brooklyn, NY · Member since 2021 · 64 posts · 57 votes
    4y

    @Phil Li I believe the main obstacle will be your DTI ratio, especially once you pull out ex. 20% of equity. It may not be a problem on your next property but if you keep purchasing properties that do not meet the 1% rule, eventually you'll have to find a lender that will allow higher DTIs. Many lenders will also want two years of rental income reflected on your tax returns, but there are lenders that will simply take signed leases too. I would look into investing in towns where SUNY branches are located. The further away from the city you get, the better.

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