All Forum Posts by: Llewelyn A.

@Dan Ashley

Hi Dan!

I'll chime in on the multi-family investing in Brooklyn, NYC.

A tiny bit about myself. My Partners and I have been buying Brooklyn small multi's (2 to 4 Unit buildings) since 1998.

We currently own 9 of these buildings in various neighborhoods including Clinton Hill, Bed-Stuy, Windsor Terrace and Ditmas Park.

Total Assets would be somewhere between $15 and $20 Million in the portfolio.

Every since we bought the first property, which was in Ditmas Park for $340k in 1998, everyone told me it was crazy.

I continue to hear how crazy I am to continue to buy every one or two years since 1998.

That $340k Property in Ditmas Park is worth $2 Million today. What started out as a break-even house hack (yes, I was house hacking before BiggerPockets was invented and started to coin the word Househack) cash flows very well as Rents move much much more. For instance, we now charge $2800 for a 2 Bedroom Apt that used to be $1k in 1998. And the $2,800 is still below Market.

Virtually all the properties in this portfolio did similarly. For instance, a property in Windsor Terrace purchased in the year 2000 for $140k is now worth $1.2 Million, conservatively.

A more recent purchase, a Brownstone I purchased in 2015 for $900k and renovated for $300k, so all in for $1.2k is worth $2 Million now.

Do keep in mind that past performance does not indicate future performance.

However, these kinds of numbers are very typical from 1998 to now.

When I was teaching, I used to ask my Investor Students, "What is a Bargain?"

Most believe that a Bargain is a discount on the price of something at the time it was purchased.

For instance, if a pair of shoes is selling for $50 when another store is selling it for $100.. yes! That's a bargain!

BUT, in Investing, every one of my properties are a "Bargain." When I tell someone I bought my 1st property for only $340k... they always tell me that's a great Bargain!

However, I never got a discount on the 1st Property. Every property like it was selling for around the same price. So it wasn't a Bargain in the traditional sense.

So, for Investments, a Bargain is not how much of a discount you get from similar investments. Instead, the Bargain is the discount on the Future Value of the Investment as compared to what you purchased it!

It didn't matter so much that I got 10% off ($34k) on the 1st property in 1998 when I am making $1.66 Million above the purchase. That's small potatoes.

The bargain is the FV compared to the Purchase Price.

Anyway, I'm not advising to buy in Brooklyn. I'm just chiming in to give you a different perspective.

@David Campbell

If you read through a lot of my previous posts, you will see that what you did and achieved in this "Negative Cash FLow" Investment Property has been done many times by myself since I have started investing in Brooklyn, NY since 1997, which was 24 years ago.

Missing from the Majority of the commenters on this site in general is that they fail to understand that CASH FLOW is not a Characteristic of the Investment.... it is a Characteristic of the INVESTOR.

Let's say you didn't finance the Investment at all. You bought it all Cash. The property will Cash Flow.

However, because you CHOSE to buy it with 100% Finance, the Investment went NEGATIVE Cash Flow.

So, what is it? Is this a Negative Cash Flowing Investment or is it a Positive Cash Flowing Investment?

The Reality is that an Investment is NEITHER Positive or Negative. It's the Investor that makes the Investment either Positive or Negative Cash Flowing.

When an Investor realizes this, it is up to their Risk Tolerance to determine if they can handle a Negative Cash Flowing situation that they have put themselves into.

For those that also commented on saying that David was "Lucky", yes, we are all Lucky, even if you achieve a profit with a Positive Cash Flowing Situation.

You just have to understand what is Luck. Luck has 2 parts to it:
1) You have to be PREPARED to Buy the Opportunity, which means you have to have the funds for it
2) You have to RECOGNIZE the Opportunity so you can buy it

Without both of these, you cannot get "Lucky."

You may have the Money but if you can't recognize the Opportunity, you can't get lucky.
You may recognize the opportunity, but if you don't have the Money, you can't get lucky.

BUT, if you can do both, you have set yourself up to be lucky.

We ALL want to be lucky this way.

I have been doing what David did for 24 years in Brooklyn, NYC and my portfolio increased by over several Million $$.

The Cash Flow also increases dramatically as you can imagine what rents were 24 years ago and what it is now in Brooklyn, NYC.

It's almost impossible to compare the returns to any other investment other than the great stocks performers or high flying Crypto.

If one wants to achieve results that have the best "Luck", then you better have the Money and recognize the Opportunity.

Many here may have the money, but just won't recognize the opportunity so they can't get these "Lucky" deals.

@Harrison Sharp I'm a Brooklyn, NYC small Multi-family Investor with 9 Buildings and 25 apts. I'm not selling for a while longer.

The properties I buy are in neighborhoods where the tenants generally are not going to lose their jobs or are above the requirements to meet the ERAP requirements (ie. income is below 80 AMI, etc.)

Furthermore, I require the tenants to have 1 year savings to the equivalent of 1 year rent.

That way, should I ever have to take them to Court, I can argue that the tenant could have paid rent through Savings, but chose not to do so.

However, throughout this Pandemic, 40% of my tenants chose to leave rather than stay and not pay rent. These are the kind of Renters I can find in NYC. They were highly qualified and have assets to lose.

I promptly re-rented those apts. Today, I am getting higher rents than pre-pandemic.

Everything is about how you set up your Portfolio and the quality of the tenants in that Portfolio.

@Laura Guy The big issue I see is that for those Tenants that KNOW they will qualify for ERAP, they don't really have a choice but to stop paying rent, even if they have savings OR if they have enough money through UE and the Booster (which ended).

Imagine you are a Renter and you had enough savings to pay your rent for the year. However, the Tenant Advocate tells you that you can get your rent paid for free as you were affected by Covid-19, which maybe true. HOWEVER, if you paid your rent, you certainly will not be reimbursed from ERAP.

That's the biggest flaw in the program. The Law should have promised to Pay the tenants back should they have paid their Landlords the rent through their savings if they were affected by COVID-19. Furthermore, if the tenant had the means to pay the Landlord AND that could be proven in Court, the Landlord should be able to win a judgement on future income after the Pandemic.

Only IF the tenant was both affected by Covid-19 AND they did not have enough Savings OR enough UE / Federal Boost would they be allowed to stay until the Landlord get's paid.

At the same time, the Landlord should have been able to take the Covid-19 Hardship Waiver from the Tenant and give it to their Municipality so that they stop paying Property Taxes and Building Utilities as well as the Bank's Mortgage.

The Gov'mit should have allowed the Landlord to put a lien on the Assets of the tenants who owe rent right away until the Gov'mit is able to pay the back and future rent.

This is an extremely one sided help for the Renter and disaster for the Landlord.

The problem is always that these laws could have been worked out in such great ways for the Majority, both Tenants and Landlords, if only the Politicians would just think several steps ahead instead of just ONE.

This is EXACTLY why, when I do buy properties in Liberal NYC, the epicenter of Liberalism, as long as my Portfolio of Properties can be steered away from the mess of the unintended consequences of bad politics.

I also now have the added advantage of having NONE of my properties affected except for minor leaks during the Hurricane IDA historic flooding.

Sometime after the Pandemic, I may convert all my Multi-Family properties to Condos and sell it all as it will be the highest appreciation I will see at any point of time in the 24 years I have been buying NYC properties when considering that I have easily survived the Pandemic and Hurricane IDA.

What we need to do is to try to buy investments that can withstand the Long Arm of the Laws that are passed by Liberals who just make it worse for everyone, including their constituents, the Renters, who will suffer from much higher rents in the future.

I use IRR exclusively because it allows me to calculate all the multiple ways of making profits in Real Estate.

To re-word the OP's scenario in a NON-IRR way, it can be as follows:

Let's say you buy a property for $1 Million with ZERO down.

Said property's Rents pays for ALL expenses for all of the months for 20 years.

20 Years later, you sell the House. BOOM..... you are a Millionaire without having to put in a dime.

While my scenario isn't exactly like the above, in my case, I buy NYC Properties generally at Break Even Cash Flow but with Million Dollar Mortgages.

I have been holding properties starting from 1997 when I bought my first Investment.

I now have 9 small multi-family in various stages of Principal being paid by the Tenants.

This portfolio has made at least 6 Partners who own the Portfolio Millionaires.

Is it a strategy for everyone? NO. Does it work? YES! Is there proof? You are looking straight at him.

Hi @Sonia Chopra

That's going to be a great investment for you!

In my experience, it really should have been up to the Seller to have the Letter of No Objection available for you if the building is being used as a Two Family.

What you should do is find out:

1) How is it currently Taxed?

2) How many Gas Meters are in the building? If it's at least 2 Gas Meters for 2 Kitchens, that's Great!

3) How many Electric Meters are there? If there happens to be 3, then that's great too!

What probably happened though is that the building was not upgraded to accommodate 2 apts by separating out the utilities but it might be taxed as a two family.

Either way, you need to put together the evidence that the building is a Two Family by gathering as much information as you can get.

Then, either yourself or and Expediter should submit the request for the Letter of No Objection. If the deal is really good, I would hire an experienced Expediter to submit the Request.

It's really very annoying that the Seller did not have the foresight to have this ready when the building was being put up for Sale.

I am assuming that you are trying to buy the building as a two Family so you can have rental income?

Do keep in mind that Single Family homes can be as valuable, and in some cases MORE valuable, than a multi-family. You really need to do your Comps very well.

Hopefully this helps!

Good Luck with your endeavor!

 Hi Kevin!

Thanks for the mention.

I do want to make a correction, however.

1) I do NOT sell Properties or Lease Properties that I do not myself own

2) I only buy properties in Brooklyn and for my own portfolio.

You may ask me why I got a Broker's License? It's to save on the Buy-Side Commission since I'm the Buyer's Broker representing myself.

What I would like to also mention is that I have been buying Brooklyn Properties for 23 years. I have been in 4 MAJOR downturns. Very few Investors in this Blog has my years of Experiences and have survived these major downturns, not to mention doing great in the last 23 Years!

Will the next 23 years be indicative of the past 23 years in my specific area in Brooklyn? Maybe, maybe not.

But I would not write off Brooklyn or even Manhattan.

BTW, if you ever read my posts, you will find out that I'm not a believer in Manhattan Condos. They do terrible when compared to Brooklyn Brownstones. The Pandemic made that even worse. But I still think Manhattan will do quite fine.

I just leased a 1 Bedroom Garden Apt in Clinton Hill, Brooklyn for $2,700 / Month to a couple that has over an 800 Credit Score and make over $130k while one of them are not working.

In 15 days, I will be advertising my 3 Bedroom / 2 Bath 1350 sqft Apts, again in Clinton Hill for $3,700 per month.

I will admit that my rentals are normally below Market and $3,700 would normally be below Market in my area. I think it will be AT market now since $4k would probably be the pre-pandemic rent. But these large apts are desirable now because everyone wants a separate office space on the other side of the apt than their spouse so that they can both work remotely! So I'm anticipating that the apt will also go quite well!

My management style is to rent to be best qualified rather than the highest paying because in a downturn, you will need the quality because without it, you can go bankrupt.

It might be that management style that has work so well in this Pandemic.

The Companies that will survive an Thrive are easily going to be the big Tech Companies.

These Companies will make MASSIVE Amounts of money, as they are now.

These Companies are not stupid.

Guess where they are expanding to?

"At least one industry, however, is charging in the opposite direction. Led by some of the world’s largest companies, the technology sector has expanded its footprint in New York during the pandemic. Facebook has added 1 million square feet of Manhattan office space, and Apple added two floors in a Midtown Manhattan building.

And the surge in available commercial real estate has actually been a boon for some new businesses that have been able to find spaces at rents that are lower than they were before the pandemic.

“I’ve seen the obituary for New York City many times,” said Brian S. Waterman, the executive vice chairman of Newmark, a commercial real estate services firm. “The office reboarding will start to occur in May, June and July, and you are going to have a much fuller occupancy once we hit September.”

This is the same article that was linked.

What's really interesting is that while Manhattan has been doing awful, my Brooklyn Properties are continuing to do well.

There will be a clear demographic change that will be happening. The young, motivated, high energy and highly skilled will migrate to the Cities, especially NYC.

Indicative of this, my Nephew was just hired by Facebook for $250k Annual Full Compensation.

My money is not only will NYC recover, but those that left will be forever priced out within 5 years from now.

I would not bet against the richest companies in the world.

@Gianluca Rossi

I have been buying in Clinton Hill, Bed-Stuy, Windsor Terrace and Ditmas Park for the last 23 years. Only sold one of 10 properties, and that was to a Partner.

Needless to say, my Partners and I have made multi-millions.

We did exactly what you did, house hacked before House Hacking was coined. It works.

There was one guy I met who had a Cobble Hill 3 Family back in the 90s. He sold it for about $2 Million around the year 2000.

He then took that money and bought a Single Family Brownstone on 1st Street just a few houses in from Prospect Park. He listed that for $6 Million a short while ago.

A lot of people on here won't believe that a $6 Million property will probably be worth $10 Million in 10 or 15 years just like they won't believe a $2 Million Property will be worth $6 million in 20 years.

But all you need is one property and you can become a multi-millionaire.

Also, I'm not giving advice. I'm just giving my personal experience and observation.

As an Investor in one of the highest priced Housing Markets in America, NYC, I place a higher value on the Character of the Tenant than I do the Contract of the Lease.

I know that the incredibly unbalanced pro-tenant laws here in NYC means that my Contract is virtually worthless as the tenant has many options to screw the Landlord despite having a legally binding Contract.

BUT, if I can rely on the Character of the Tenant, I have a higher probability of a good outcome for both of us.

For example, I did have a Pilot that rented my apartment and obviously, he lost his Job.

HOWEVER, he was a fantastic person and so was his Wife and child.

They could have easily stayed rent free. But they chose to leave, downsize to their Parent's home in the Mid-West, just so I can re-rent the apt.

The worst that happened to one of my Tenants is one that just bought out her partners for over $1 Million on a very expensive Restaurant that they owned together. She took out a personal loan.

The Restaurant failed completely and she is stuck with the debt. Again, she was another of my tenant with high integrity. And again, she moved in with her Boy Friend and vacated my Garden Apartment, knowing that during the Pandemic, the Garden apartments in a dense place like NYC is incredibly in demand at this time.

My personal Investing and Management Style is that I want Tenants that will have my Back as I have theirs. The Contract between us in secondary.

Given all of this, when you don't trust the Government, then you better put in Tenants that you can trust to watch your back.

BTW, this also makes my job as the Landlord and Property Manager a pleasure.

If you hate your job, no point on working in that field.

A side effect of this kind of Management is that it provides the best kind of insurance you want, an almost bullet-proof rent roll that even a Pandemic can barely affect. Even when the Government basically tells the tenant that you can stay in your apt just by filling out a form *wink* *wink*

I have survived and have done well in many Crisis with this Management Style.

The DOT Com bubble that crashed the Stock Market by 66%

9/11 Terrorist Attack

The Great Recession of 2008

And now... the Pandemic of 2020/1

I suspect that in the next 10 or 20 years, I will wind up looking back at this as just another bump in the road.

The bottom line is that if you don't trust the Government or Politicians, then you better get Tenants that you can trust.

@Jess Archives

Direct from the IRS (https://www.irs.gov/faqs/itemi...):

"QuestionMy housemate and I, both the legal owners of our house, pay mortgage expenses from our joint account. The monthly expense also covers the real estate taxes on our home. The Form 1098 and property tax statement only have my name and social security number. How do we split these payments of interest and taxes on Schedule A so we can both claim our share on our separate tax returns?"

Answer

To deduct taxes or interest on Schedule A (Form 1040 or 1040-SR), Itemized Deductions, you generally must be legally obligated to pay the expense and must have paid the expense during the year. Even though two unmarried individuals can both be the legal owners of the home and pay the mortgage equally or from common funds, the lender normally sends out only one Form 1098, Mortgage Interest Statement. Additionally, the local taxing authority may also only provide a receipt in one taxpayer's name.

If you’re each eligible to deduct the expense, you can both take a deduction for your portion of the expenses. Determine the proportionate share of the deductions based upon all facts and circumstances.

With respect to mortgage interest, apply the home acquisition debt limit and the home equity debt limit to the qualified residence or residences to determine if all of the mortgage interest can be deducted. If you're unmarried and pay mortgage interest on the qualified residence, the limit on home acquisition debt and home equity debt is applied per taxpayer. See Publication 936, Home Mortgage Interest Deduction for the debt limit amounts.

If each taxpayer paid one-half of the mortgage and real estate tax expenses, then each Schedule A should reflect one-half as deductions. Both of you should attach a statement to your Schedules A explaining how you're dividing the mortgage interest and payments of real estate taxes. Your housemate, who didn't receive the Form 1098, must list the mortgage interest he or she paid on Schedule A line 8b, "Home mortgage interest not reported to you on Form 1098."

Please keep your records on your split of the deductions for the mandatory review period (statute of limitations) since the information reported won't match the records submitted to the IRS.