All Forum Posts by: Llewelyn A.

@Jalen Henningsen

@Donald Jeune

Thanks for the mention Donald.

Jalen, I've been house hacking the Brooklyn, NYC Market since 1997, even before BiggerPockets ever used the term "House Hack" or maybe they were NOT even around back then when I started investing!

First, you should have an open mind about your Strategy. You should not decide on Investing in a particular place until you educate yourself on what strategy works and then decide what you want.

There are a lot of people who will automatically rule out NYC, yet I, @Donald Jeune and a whole bunch of others have not only done well... but we killed it with Investment Properties here in NYC.

You can PM me to find out more information.

However, that's not to say other strategies which involves cash flow properties in different cities are not a good idea. You just need to know what are both Strategies and then make a decision.

One word of warning, however. I've personally known friends and family that failed to have purchased their home or investment here in NYC.

Eventually, they were priced out of the Market.

As an Example, in the year 2000, I bought a 2 family in a sketchy location near a part in Brooklyn called Prospect Park. The purchase price as $140k. It required a $21k down payment and $7k in closing for a total of $28k invested. Later I did $40k of renovations so that the total invested was $68k.

It will sell today, 17 years later, for over $1 Million. That would be somewhere around an $850k profit on $68k or a Total Return of 1,250%. Divide it by 17 years and you get a 73% ROI per year on just the Value Increase.

The Cash Flow was nothing in the year 2000. The rents were only $500 each apt. HOWEVER, today, those apts are now rented for $1,900 each or an increase of $1,400 per apt. I'm not even including that in the ROI.

When one of my relatives sold the property next door to mine in 2003 for $230k, she can now NEVER move back again because she can't afford to pay $1 Million for the same property she sold 15 years ago. That's the risk she took but she really didn't understand the dynamics of Big City Investing.

It's a different world in the big City. Therefore, a different Strategy.

There is also a reason why you don't normally hear about investing in Big Cities. The Math and Economics is generally a LOT more work to understand and is much more sophisticated. Books like What Every Real Estate Investor Needs to Know About Cash Flow are just never going to be popular because the math is very complicated although the Book breaks it down really well. Even then you may need someone to show you how it really works.

However, you can see that over the last decade, the amount of money those of us that had invested in Big Cities that didn't have a problem (such as Detroit), made an enormous amount of money.

So my advice is to learn both Strategies. But one kind of calculations will be able to help you understand both. That calculations is the Internal Rate of Return (IRR). The above book makes a great attempt at it.

Economics is another important factor. Knowing Economics would have saved the those who lost money in Detroit (of course not everyone lost money in Detroit, but more than the majority did). It should have been fairly easy to know that Detroit was in trouble economically as the Domestic Automobile Industry was losing Market Share to Foreign competition. That was very important to know in a city that depended 90% on Domestic Auto.

I don't discourage you to Invest here, in fact, I would encourage you. But don't think it will be a walk in the park. That hard work would eventually pay off!

Why don't we start a Syndicate and buy one great property in each of the 20 Cities!

haha... then we are guaranteed to hit the jackpot!

@Eileen Murray

Yes, these laws are probably a problem for Landlords.

I own 25 Apts currently and have been owning for 2 decades.

I am incredibly diligent in picking my tenants, but's that because Brooklyn is an incredibly in demand area where the vacancy rates are so low, that you can more likely have a very strict and stringent tenant screening process.

Typically, my tenants have to have over a 700 Credit Score, income of over $150k combined, no evictions, references from their previous landlords and have bank statements to prove they are up to date on their rents. All that for the pleasure to rent at $2k to $4k for a typical Brooklyn Apt.

In areas that are not as "in demand," I can imagine that you can certainly get into trouble because you cannot perform the due diligence that I can in my particular neighborhoods.

I actually buy only in these high demand areas because of the unlimited supply of quality tenants who can pass my due diligence. I've never had a problem renting and typically, I fill a vacancy within 2 weeks of advertising.

So I would say that laws like these seem to affect Landlords in areas where the demand is not high and you cannot weed out potentially bad tenants.

Just my opinion, of course.

@Robert Gilstrap

Hi Robert. Just curious if you know how the Transfer of Title to the LLC, which breaks the coverage for Owner's Title Insurance, affects Lenders Title Insurance since all Lenders will want to have it?

I'm assuming that it breaks Lenders Title Insurance which is why if the Lender finds out, of course they would want to have it revert back to the original Owners, if that can possibly be mended in an acceptable way.

@Rashmi Patel

@Pam G.

I have been partnering in the Brooklyn, NY area with 2 Physicians.

One of the Physicians, let's call him Dr. Marshall, also wanted to get started in REI when he was younger.

Unfortunately for him, he took a $40k course from one of the Guru's, which included Coaching. The Coaching sessions had him take over $100k out on Credit Cards to purchase a property in Las Vegas, pre-Financial Crisis.

He wound up buying a SFH and rented it out, but after the crash, Vegas property values plummeted by about 70% of it's pre-Crisis Peak. He was over $250k in the hole.

Unfortunately, Bush had signed in a change to the Bankruptcy laws which took away the advantage of Chapter 7 since his Salary was too high.

He found me through courses that I was teaching in NYC. I helped him out of his predicament. Eventually, I trained him and he invested in multi-family Properties in Brooklyn starting around 2013. Today, he's a Millionaire because he stopped the bleeding on his first investment and the Investments he made with me did great!

The 2nd Physician, Let's call him Dr. Mike. He was a long time friend of mine for over 25 years. Never invested because he grew up with me in Brooklyn, prior to the Gentrification movement. He only saw what Brooklyn was before.

BUT, after visiting with me every year for the last 10 years.... he started to understand the methodology of investing in high appreciating, quality areas in NYC. He became a Partner 2 years ago in multi-family. He has done well, but it will be slower for him than Dr. Marshall because he invested just a little bit more recently.

Anyway, those are a brief history of the two Physicians I work with. I'm expanding working with Physicians mainly because they have a lot of colleagues.

I will say, however, that like a lot of very demanding, highly stressful professions, you are going to be very good at the profession you chose. But that doesn't mean it will translate to REI. There is a lot to learn and I don't consider "Rich Dad, Poor Dad" and Educational Book. I would prefer you try to read What Every Real Estate Investor Needs to Know About Cash Flow

Since you have already proven you can reach a very high level of education, the linked Book should be a book you can understand given enough time to work out anything fuzzy.

However, that's just my opinion!

I'm in favor of Insuring UP your Liability Insurance.

Don't forget that there may be added costs to having your CPA work on your LLCs.

You still need proper Liability Insurance anyway, so why not just spend the money on getting better Insurance protection rather than LLCs?!

From what I understand, the costs of filing your taxes for the LLCs can be quite high in places like California even if you are using a non-California LLC.

There are all sorts of Insurance that you can use, especially Umbrella Insurance.

So, Insure up to the max Liability Protection for:

1) Vehicles

2) Properties

3) Personal

If you had a $1 Million liability protection on each property plus you had a $2 Million Umbrella policy which protects you above any law suits that can win above their liability level, you have $3 Million of Liability protection per incident.

I'm not an expert with Insurance, but it if you had all of this, then there may be only a few reasons to use LLCs.

1) Partnerships where you may want to change Partners in the Future.

2) In the case of larger multi-family properties, I would add the LLC.

I'm not a Lawyer so consider the above ENTERTAINMENT!

@Brian Keeler

@Russell Brazil

I am in complete agreement with Russell!

Also, I just posted about a misleading indicator of In/Out Bound migration. It's misleading if you don't consider immigration from other Countries and Population growth from birth.

Look at all the Stroller neighborhoods in NYC, especially Park Slope, Brooklyn. The population is exploding. Go to Prospect Park, Brooklyn, which is local and not affect by tourist, and you'll see that while it's the 2nd largest Park in NYC, there is barely any room to do activities from all the people who live in the surrounding area.

From this report NYC Population Growth you can see that NYC's population growth is expect to increase another 800k. Where are all of these people going to live?!

I also like to tell a story about a friend of mine, let's call him Bob.

Bob invested in Bristol, CT in 2004. He made approximately $1k a Month in Cash Flow. The area did not appreciate in both Cash Flow or Value, but he was happy about his investment.

He lived in Manhattan and rented an apt for $2k per month.

By the time today, 2018 came, that same apt he lives in charges him $4,600 per month. That's an increase of $2,600 per month. Did the Cash Flow in Bristol, CT help him? Maybe.... but it seems to me that while he can claim a positive cash flow on his properties, his NET Cash Flow is NEGATIVE if you consider his rent in Manhattan.

Had he bought the apt he lived in, he would have been better off, saving $2,600 per month if he locked in a 30 year fixed rate mortgage back then. The price of his apt back in 2004 was around $1 Million. Today, it sells for over $2 Million.

I'm trying to point out that the dynamics of where you live and what you buy affects your net worth and ability to live where you want. Bob, unfortunately, had to leave Manhattan and live in a lower cost of living area.

Also, when compared to my properties, which Bob had a chance to buy into in 2004 but refused because he wanted to have significantly positive cash flowing properties, he really lost out. My management is very local and I hardly do anything.

Bob's Management basically needs to do at least ONE eviction per year and has several problems, including one recently where a Car skidded from a hill and broke his front facade.

So keep in mind that things are not always about the most cash flow you can get RIGHT NOW. There are future cash flows that need to be considered as well as easy of management.

@Liz C.

This is not just for Liz, but since she asked about New York.....

Like everything in Real Estate, a lot can be boiled down to a specific location.

New York State might be among the top OUT Bound States.... but NYC is still projected to grow another 800k more in population.

The Statistics of just IN/Out bound migration of people can e VERY misleading.

Obviously, if NYC has a population of 8.2 Million, let's say 5% of the people leave, but 10% of the people have at least ONE child per Adult........ the NET population still grows significantly.

NYC Population Projections

All Real Estate Investors know that the most immediate factor in your success starts from:

1) The dynamics of your Investment

2) The Block that it's on (if this is a dense city)

3) The Neighborhood

4) The City

5) The MSA

6) The State

7) The Nation and lastly

8) The World Economy

The report is based upon 7) The Nation and how people are migrating. There are still 1-6 MORE important factors to consider before you get to 7).

@Sam Shueh

Thanks for the advice.

I have already started the Brokerage.

I just secured my Broker friends, one of whom owned his firm for 15 years and he said he would oversee my transactions until I'm ready to be on my own. No cost to me. He owes me for helping him out when he needed it most.

Since I won't be taking on an Agent, it will be easier on my Broker friends when I do get into my first Purchase as Buyer who is a Broker.

So it looks like I'm all good!

@Russell Brazil

Thanks for pointing out the Home based office.

I actually have a large home here in Brooklyn which would normally belong in the Suburbs. It even has a 2 car garage and a 100 foot driveway.

I have a dedicated room for my Property Management so adding the Brokerage shouldn't be much of a problem.

In reality, I'm thinking more in terms of going through We Works since they have excellent office locations and I can rent a space very cheap and still have access to office facilities like Conference Rooms.