All Forum Posts by: Llewelyn A.

You can try East West Bank. They have several branches in NYC. I took out a non-owner occupied no doc HELOC.

They will wind up charging you closing costs and their rate will be something like Prime + 2%.

Seems like the procedure is different in NYC than it is in other places from the comments on this thread.

In NYC, all written and verbal Offers are NON-BINDING.

All it does is determines whether or not there is a meeting of the minds in terms of price and some contingencies, but without an executed Contract of Sale, the offer itself is non-binding. In fact, I personally have never seen an Offer where a Buyer put a significant amount of money down (it's either nothing or $1), so there is nothing to lose!

Furthermore, the Statue of Frauds needs everything in writing and signed by both parties, making the star of the show to be the Contract of Sale.

I can make 20 different offers at the same time, letting the Listing Agents know that I am submitting multiple bids. That should really put fire under their toes. I don't really put an expiration date. I don't think it would really help since NYC is pretty much ALWAYS a hot market.

If a Seller is REALLY interested in moving forward, then I send off a deal sheet to the listing Agent and tell them if my Attorney doesn't get a Contract sent to him within a short period of time, I am more likely to to go into Contract with another deal.

I have to say that the last deal was the funniest. I submitted an offer to purchase a property which was originally listed at $1.75 Million. My offer was $1.55 Million, all cash.

The Listing Agent said he had a deal for a very similar offer, no finance contingency. 

I re-submitted my offer for $1.5 Million, $50k below, sent in a Deal Sheet for that price, and called his bluff.

The Contract was sent to my Attorney last week for $1.5 Million.

I don't have time for games.

Maybe this only works in NY since Offers are non-binding.

I have been investing in Real Estate since 1997.

I have went through a few downturns even before the 2008 crash, such as the Tech Crash of 2001 where NASDAQ lost 66% of it value.

My properties are in NYC, Brooklyn specifically.

I tend to be a very detailed oriented researcher into the area of Investment that I am studying.

Prior to purchasing my RE Investments, I learned the RE Business Cycle so that I can soften a blow from a downturn as much as possible. That's because I'm very risk adverse.

I learned that everything is a business cycle. It goes up, peaks, goes down, bottoms and then goes back up again.

HOWEVER, while it is a business cycle, most people only think of it as simply a cycle that moves against a horizontal line. They don't realize that the cycle can move against an inclined line.

What do I mean by an inclined line for a business cycle? Well, imagine a line that is inclined upward. Draw a Business Cycle along that inclined line and then you will see that when the cycle turns down, it is muted. When it goes up, it skyrockets.

Many areas of NYC is exactly like an inclined Business Cycle.

Equally, there will be areas that are declined in a downward direction. Those will exhibit the opposite of an inclined business cycle.

I believe that an Investor can intelligently determine whether then business cycle will be inclined, declined or just horizontal by understanding what happens to their particlar neighborhood during the down cyle part of the business cycle.

For instance, in the downturn, it is normal for Cities to lose money, and therefore cut services. The first service they cut is usually the Fire Department. Then the retire older and more experienced Police Officers, then Teachers.

So, you would expect more burned out vacant buildings, increase in crime and decrease in the quality of schools in neighborhoods that cannot make corrective measures. Generally, these will be lower income neighborhoods which already had problems.

BUT, for those neighborhoods which had a strong support base and higher incomes, they could afford to have a volunteer Fire Dept, hire private security to drive the neighborhood, and keep the quality of their education for the kids up via private schools, which are generally expensive.

When the down turn happens, richer families which sought to save money and chosed to live in the lower income neighborhoods, find themselves leaving the lower income neighborhoods and moving to the safer, higher income neighborhoods. This movement has the effect of making the lower income neighborhoods worse and keeping the rents stable in the higher income neighborhoods.

ANYWAY, to make a long story short as there is MUCH more to add to this analysis, this particular effect made the financial crisis of 2008 barely noticable to my properties as they all were within the higher income neighborhoods.

In 2007, the values of my properties had peaked. From 2008 to 2009, the value had decreased about 10% but the rental income stayed the same.

From 2009 to today, all of my property values doubled if not trippled.

There is a reason why I'm willing to buy in the higher income neighborhoods in NYC. The RE Business Cycle is inclined upward, softening the effects of the downturn while moving quickly up when times are good!

Hope that helps.

@Nicholas Aiola

Hi Nicholas!

I'm sure this must have been addressed several times but I am spending way too much time looking through the 29 great pages here in this thread!

Was wondering if you can answer a few questions in regards to using an LLC to hold rental property with multiple partners.

Several Partners and I are buying a Rental Property All Cash. We are planning on starting an LLC, fund it and then buy the property.

It's the tax side that is a bit confusing to me.

I believe that the members will receive K-1s?

The Schedule E of the LLC will be attached to each Member's personal returns?

Then we fill out our own Schedule E? Is that correct?

Do we avoid paying Self-Employment Taxes (FICA) as would be normal in this situation if we did not form an LLC?

Does a Member have to be a "Managing Member" and does that member have to pay Self-Employment Taxes?

Sorry about asking questions which must have been asked a million times to you! I'll keep researching to see if I can dig up the answers as well!

I am considering buying a Building all cash under and LLC with multiple partners (or Members in this case).

Curious how this will work on the tax side.

Since this is a pass through entity, we will receive K-1s.

Then we need to fill out Schedule E or Schedule C?

My understanding is that this is filed under Schedule E, not C.

If it were Schedule C, then we would also have to pay FICA, correct?

I take the Franchise Approach.

Basically, most franchises want you to work in the entire operations so you get to understand every aspect of operating the franchise.

Some franchises will NOT let you buy one unless you work every part of the operations.

The chances of you becoming successful is exponentially increased when you understand the details of your operations before you become the hands off Manager.

For all my properties, I self-managed the entire operations, building up my portfolio slowly over 21 years in a City (NYC) which is completely biased towards the Tenants.

I learned it so well, I created my own Brokerage firm, trained and hired my own managers.

I brought down the cost of Management in an extremely difficult City for Tenants to about 5% of the Rent Roll.

The extra costs such as evictions are now insignificant as I implemented a very tough tenant screening approval process. I haven't done an eviction in 15 years.

Also, as the Rents move up, as it always does in NYC, the percentage of the cost of Management decreases as the pay for the workers in the Property Management firm stays close to the same.

If I need to change one of my managers, it's a piece of cake since I can pick up the slack myself until I find a good one.

It also gives me a clear advantage because I make changes to improve the management. For instance, implementing an online rent collection program such as Cozy. In my case, I use Avail.co which works EXCELLENT.

However, I still know some management firms that still collect checks! I think that's absolutely backwards in this day and age.

Now that I have a brokerage firm that does all the property management, expanding is a breeze. Once I buy a multi-family, my property management system onboards the new property.

Yes, it's a long road to achieve this level of functionality and expertise. But now I'm at the top looking down at a well oiled machine. I barely need to do anything in regards to the property.

So now I have time to create Real Estate Software and build a completely new business!

In fact, the advantages of having the Brokerage helps in many ways! I have even made money recently just by referring a relative to another Brokerage to sell his property, acquiring a Broker's referral fee!

The amount of different streams of income that you can create once you understand all the aspects of a business is incredible.

I know it's not for everybody, but I believe the best way to build up your Investments is to first understand the operations of the Investments. Then you will make it run smoothly and discover all kinds of ways to make more money!

@Joshua Handlarsky

Hi Joshua. I have been Investing in NYC, specifically Brooklyn, for 21 years. EVERY year, I hear exactly what many will say today... "WAY TOO EXPENSIVE" and every year, the property values go up.

What usually drives property values is the monthly rents. So when rents move up from $500 per apt back in the year 2000 to around $1,900 today for one of my buildings, the value of the building increased from $140k back in 2000 to $1.4 Million today.

NYC is a Future Value (FV) play. I don't like to use Appreciation play because if you use that, you negate the fact that it's not the value of the property that is the driving force of the value increase, it's the RENTS. The Rents drive the property values higher.

When you keep that in mind, and you LIVE in a rental in NYC, you better keep in mind that rents in 10 years will be FAR different than it will be today. You can easily get priced out unless you wind up with a rent stabilized apt.

What I like to tell people who are thinking of investing but they want to live in NYC for the long term..... don't say you CAN'T buy a place here... rather say "HOW CAN I BUY A PLACE HERE." ALL of my relatives who did not buy here are priced out. Most have moved out because they cannot afford the cost of living here.

So keep in mind that the danger of NOT investing here is to be priced out, probably within 10 years.

You can read many of my previous posts. I try to help as much people to understand how to invest in NYC. I also try to let them know the dangers of NOT investing in NYC but trying to live here for the long term.

If you plan on moving to another less expensive place, then it may be best to buy there first or you may find yourself out price there too.

Something to keep in mind.

I have been owning multi-family properties in NYC for 21 years. All of my Security Deposits equal one month's rent at LEAST unless there is an extra security deposit needed to help with their qualifications.

When the Rent increases, and they always do here in NYC (except for in the financial crisis), I match the security deposit with the new rents.

It helps in management in multiple ways, especially as the math is easy. You return the exact one month rent back to the tenant when they leave (providing there is no damage to the apt).

I bought my first Investment Property 21 years ago.

Just before that, I asked almost ALL my friends and Family to join in with me.

No one wanted to do it. The most common reason was that they didn't want to unclog toilets in the middle of the night.

There was one friend of a Brother that hung out with me. He was willing to go into the first investment.

We partnered up, bought it. That led into the next 6 more, all in Brooklyn, NYC.

Fast forward to today, I'm millions richer than all the friends and family that didn't want to unclog toilets in the middle of the night.

AND to this DAY, I have never had to unclog even ONE toilet! I call a service for that.

The biggest issue that holds people back is a low risk tolerance brought upon them by some paranoid delusion.

If you educate yourself enough, you can wind up living your dreams rather than dreaming to live.

I once read a story about 2 Doctors.

Dr. A was a GREAT doctor! BUT... had terrible bed-side manners.

He cared about the cure, not the patient, so spent very little time socializing.

Dr. A certainly cures a lot of patience as this is his primary focus.

Dr. B was a mediocre Doc. BUT, he had GREAT bed-side manners.

When his patients come in, he makes them feel welcomed, talks to them about the things they are interested, be it Sports or some collectable, Food and Wine, Vacations, etc. While he knows enough to be an adequate Doctor, people are happy after they leave even if the problem has not been solved in the best way.

The article then investigated which of these two doctors got sued the most.

Dr. A got sued far more times than Dr. B.

I won't conjecture about the moral or lesson of this story.

HOWEVER, I have owned Rental Properties for 21 years in NYC. I treat all my tenants as the Customers they are. Fix every problem quickly and visit my properties as often as I can. Sometimes, we would share a drink together and I certainly wish them happy holidays when the time comes.

I will say that even if I'm following Dr. B's plan for extra Liability protection (meaning, both Docs have malpractice insurance and I certainly have Landlord Liability Insurance), I consider the extra effort to get to know your tenants as the cost of extra liability protection.

Besides that, it gives me a good feeling and the buildings are easy to manage when the tenants are happy!