Investing in NYC
Is anyone building a personal portfolio of properties in NYC? Now seems like a good time to get into the market as I am seeing 5-6 unit MF buildings in the outer borough's trading for as low as $125K/unit and 6.5% -7% CR's.
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Could be a cool thread. Bumping.
I have no experience in NY, what were they trading at in these locations prior?
Pre-pandemic smaller MF properties under 10-units were in the $250K-$300K/unit range with caps 5.5% to sub 5% and even as low as 4% +/-.
Then yeah, sounds like you buy as many of these as you can.
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What resources has everyone used?
Why would anyone buy in NYC? It is so tenant friendly. Good luck spending all your $$$ on legal fees while you wait 12+ months to finally kick the tenant out that hasn't paid since they moved in.
What is the business plan?
Buy low, sell high
Hah. In other words, "lose all my money and blame someone else"
Isn't this typically how it goes?
Depending on FM or RS, if you wanted to be more aggressive, you are renovating FM units and raising rents, separating utilities, etc. At $125K/unit 75% LTV these properties are actually cash-flowing from day one even with the 15% - 20% discounted rents which in my opinion is short-term. For RS, there's not much you can do except hold for long term and bet that the tenant protection act laws will eventually be loosened or reversed which will immediately increase value to RS buildings.
FM units don't trade at that level. He's talking about rent stabilized assets.
Correct -- although I am seeing smaller FM 3-4 unit properties in the Bronx selling for around $200K/unit.
I am going to give you a piece of harsh but well meaning advice: you have no clue what you're doing and under no circumstance should you piss your money away on this. Go to Vegas and play roulette. Your risk adjusted returns will be exponentially better.
I already own MF in NYC, but good luck in Vegas.
I'm not sure why people are so down on your idea. Yeah there's some regulatory risk, but from my understanding working with partners in New York the situation is stable from that perspective. You'll probably need to underwrite some sort of allowance for non-payers until the moratoriums are lifted, but this seems like a pretty good greedy/fearful play. Again, caveat is that I know very little about NY real estate outside of what I hear from our partners.
Because "buy low, sell high" isn't an idea. It's a meme. Owning and operating real estate anywhere is a lot more involved than just buying at a good price, and you can dial that up to 11 in NYC where tenant protection is a thing and there is a ton more regulation.
We just saw a massive regulatory change not even 2 years ago. And then another one with the eviction moratorium last year. If you buy rent stabilized, well, we've seen like 1% RGB increases the last several years at best.
Half the people in NYC real estate don't know what the hell they're doing. There are a million ways to go wrong in real estate in New York. Especially when it comes to small buildings. As I say often on this forum, people without experience in this industry assume that once you've underwritten a deal, you're good to go. That is the tiniest, easiest, and least important part of the business. There are five dozen tiny expenses most people never think about which completely sinks their deal - I know, I encountered all of them the first time I bought in the city (a 5-10 unit rent stabilized building, for perspective). The new laws and all didn't help, but I was underwater before that. It was a valuable lesson to have learned, and I was even less blasé than the people replying on this thread.
I agree on most of this, but disagree on "buy low" being a meme. There are plenty of examples where people bought when others were fearful and made a killing (e.g., SFR post financial crisis, the stock market back in March, etc.). Again, with the caveat of not knowing much about the fundamentals of NYC and what market pricing looks like, if what he's saying is true, that properties are selling for half the price they were, that seems like a good opportunity to at least investigate. If it turns out that all of those properties have tenants who aren't paying/can't be evicted, etc. or have other hair on them, or have expenses not accounted for as you mentioned below, then sure, but it seems at least worth investigating.
This is the one area I do know a lot about for NYC as one our partners was concerned similar rent controls would expand in other major metros. Like I said, most of the regulatory risk has passed, people got their rent control laws and there doesn't seem to be additional change/risk on the horizon. This doesn't mean that you don't need understand the regulations to a T and account for them.
I hope your investment turns around, or you're able to exit smoothly, as having an underperforming asset can be a huge stress, but it sounds like underwriting wasn't as easy/unimportant as you thought given misses on expenses killed your deal? I probably would miss them too not knowing the market, but that shouldn't dissuade someone who has experience and can, hopefully, account for them? As for the rest, I'm not really sure what you're trying to say other than that making investments in real estate is risky, which is true, there is a possibility they lose money here.
Says the guy who thinks you can buy a real 7% cap in NYC? Hah, you won't own it for long!
Owning small buildings in NYC is an absolute money pit unless you can self-perform a lot of the work or be an absolute slumlord. Since 2019, the latter option has been made vastly more difficult, and even so good luck in this political environment.
Following.
$125k/unit in nyc?????
On the RS side, yes.
Hey Christian, I saw your posts a while back talking about flipping duplexes and what not. Which markets did you start in? Looking at northern nj and rock land county but I feel like going 2+ hours out to break even is tough (I know it builds experience and helps your credit profile)
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