All Forum Posts by: Josane Cumandala

Welcome to New York!

I could see demand for multi-families rise because Westchester has some of the highest property taxes in the nation and homeowners there can no longer deduct their local taxes from their federal bills. The entire New York metro area is bracing for impact.

I'm not a CPA but my understanding is that property taxes on rental properties are still deductible to some extent and income going into pass-through entities like LLCs (which are often used for real estate) are still allowed a deduction (correct me if I'm wrong on this!). So between the tax advantages of owning rental properties and the fact that buyers in this market will not have the same purchasing power as before, those in lower income brackets (particularly younger people) may opt to rent in Westchester rather than buy a single family home. All of this would logically drive demand for multi-families.

This is all speculation on my part. It's much too early to know the full impact of the tax overhaul on Westchester real estate.

Also I don't know anything about the STAR program so I won't comment on that part.

When would be the most advisable time in your investment career to create an LLC? What are the pros/cons?

Residential real estate appraiser here. The condition of your property is the thing you have the most control over. You can certainly point out the upgrades you've purchased and how much you spent. Just be aware that cost does not equal value. The value of upgrades depends on the the priorities of buyers in the marketplace, not the cost of the upgrades to you. The appraiser will look at your property in relation to what's selling in your area. Hopefully there are some other homes selling nearby with similar upgrades which would support a higher value. Active listings can be factored in as well, as the days on market and listing discounts can help support the value opinion. Hope that helps!

Hi Justin! 

Welcome to the community. There are some great real estate investor events coming up in the city and this site is an amazing resource. Maybe we'll cross paths at an event some time? 

Good luck in your endeavors :)

Most people use the 1% rule or 1.5% rule if you're more conservative. That means if he wants to sell the property for $225,000 it should rent for $2,250-3,3750 per month as is. To avoid over-paying you need to set your price based on what the property is able to cash flow right now, because any improvements, tenant turnovers, evictions, etc. are going to be on your wallet not his. 

Since there are tenants in place, it would be good to know when their leases expire and if they are actually paying their rent on time. If you have 6 months left on their lease and they haven't paid on time once and their rent is already below market rate how is this a good deal for you? Your time is valuable and you're losing it on non-performing tenants that you can't necessarily get rid of right away to improve the units. Buying with tenants in place is always riskier than having a property delivered vacant and that should be built into your contract price.

For me it's a no-go since this property can't pass the 1% rule as is and has tenants in place (I prefer to use 1.5% as my rule of thumb as I analyze deals).

Residential real estate appraiser here. That line made me go, "...Wait, what?"

The square footage of the property should be available in the public record and appraisers generally go by that, at least in my market. Property taxes are levied based on its assessed value, so if the local government didn't have an idea of the size of the property they would not be able to tax you appropriately. Now, sometimes the GLA on public record is erroneous, in which case the appraiser will have to reconcile their measurements with what has been recorded but usually there is a explanation for the difference.

Along with the overall square footage there should also be a certificate of occupancy on file which will describe the legal use of the property. If the certificate of occupancy describes four legal above-grade apartments and an unfinished cellar, but in reality the property has two additional apartments in the basement below grade, this is an illegal use and you will have to rectify this. Taking the time to dig up this free, publicly available data  will make your job a lot easier.

Now, how to negotiate the deal beyond that or what the exact cost to rectify the deficiencies on your specific property I can't say. That is where you need the expertise of a contractor. A home inspector should be part of your due diligence as well but their job is to identify structural issues like the roof, the foundation, the presence of things like mold or termites, environmental issues etc. 

Bringing a property up to code is a bit of hassle and expense beyond a normal rehab and you should factor that into your offering price. The more data you have to back up your number the better. Good luck!

I'm sorry, are we talking about investments here?

OP sounds emotional. Do not get emotional about real estate. Do not worry about "luck" or how "hot" the market is or how to time it. Whatever property is on the market now, you can live without it. You can live without it because you've made it this far without that house. The only person who wins a bidding war is the seller.

Are you looking for an investment property or a home to live in yourself? What state? What budget are you working with? Whatever your goals are, you should have run the numbers by now and have a realistic idea of what you can offer for a property based on what it can do for you. Don't succumb to hype and sign your life away. Over-paying and waiving your right to an appraisal or home inspection or letting the seller control the title company is the surest way to buyers remorse. If the terms of buying real estate in a given area are not favorable, there is nothing wrong with walking away and exploring other strategies.

With that said, as long as you're clear on all that we can talk about offers. Studies suggest that one way to make your offer stand out is to write the seller a personalized letter. Talk a little about yourself and what potential you see in that property. Sometimes the personalized offer from a qualified buyer wins out over the highest offer with no strings because the the highest offer is not always from the most qualified (or intelligent) buyer.

My source on this letter writing strategy:

https://www.wsj.com/articles/the-strangely-effecti...

^There is a paywall on that article, sorry.

Good luck!

Paying all cash only opens you up to deal that a typical bank would not lend on. The only reason a bank would have not to lend on a property is that the asset is too risky. If it's risky and a bank doesn't want it, why should you?

In most deals it shouldn't matter if you pay cash, conventional mortgage, or some kind of creative financing. As long as everyone gets paid and leaves the closing table happy who cares? The key is negotiating a deal that works for all parties.

That said if you are paying cash do not let any external pressure to close quickly trick you into cutting corners on due diligence. You don't want to pick up the bill for someone else's deferred maintenance or contested title.

A C of O details what the legally permissable use is of the property. As an appraiser, I have encountered properties that were being used in a manner contrary to their C of O. It's not an appraisers job to rat anyone out. What matters is how the market is responding to the property. I've seen instances where the current use appeared to be more profitable or practical for the owner than the official use designated in the C of O. However as others have mentioned, banks definitely care that the property they're lending on is consistent with it's C of O. Non-conforming uses can also cause headaches if local regulators ever get wind of it or if you go to sell the property and misrepresent it's intended use. It can also sometimes be an issue for getting insurance on the property depending on the circumstance. Hope that helps.

Word up fellow Brooklynite! 

I would prioritize investing first and know the difference between an asset and a liability. A rental property should create a positive overall cash flow for you, making it an asset. On the other hand your primary residence is a liability as it costs money to own and maintain. On top of a mortgage there are the high property taxes and all the maintenance and repairs you will be on the hook for. Therefore if it were me, I would be focusing on finding cashflowing investments first that will pay for me to have my own home in my desired location. Of course there are methods that will make your primary home profitable or at least neutralize the cost (i.e. house hacking), but like you said it's just very difficult here in Brooklyn. 

I'm skeptical of turnkey operations, but I'm sure there are good ones out there. I just don't have one I can recommend you yet. Would love to hear about it if you find one! 

Good luck!