Why buy two 1br places if you want to live in one of them? You could buy one apartment and spend the rest of your money on stock, BitCoin, hair salons, or some other more diverse asset.
cause every time i think of bitcoin i want to shoot myself in the d*ck for selling it at 250
https://www.youtube.com/watch?v=VB93pUNRy44
was surprised to learn that mobile homes had lowest default rates.
I can’t watch the video now, but isn’t that because those homes are just really inexpensive to begin with? Supposedly, you pay like $500 to park your trailer in a trailer park. Some people end up not being able to pay that rent, so they sell their trailers for almost nothing.
Also, I saw a documentary about trailer parks that are specific for sex offenders or ex convicts. These guys cannot live in normal neighborhoods, so they go live in these special communities. Apparently, the rental yield is pretty good, as there is an undersupply of such housing.
Cant give you any advice. But just as a reference point. A friend of mine owns and rents out a 2bed condo in brooklyn for the past two years. Her last tenant moved out in October and she told me she had a hard time finding a new tenant. Apparently there is a gloat of rental buildings being built with apartments going much cheaper than condos (less renovated/cheaper fixtures) So the rent she has to charge on her place was not as competitive as those rental buildings. She ended up renting it out at negative 200 buck a month (that she has to contribute to PITI). Just something to consider…
Most places you buy in the city now will have negative cash flow with a mortgage. While it’s true that you’re paying some of that to reduce the principal outstanding, it’s not great to be locked into a mandatory cash suck for a long time.
its certainly not a great look - i assume thats due to the nature of some base level of rent growth whereas your mortgage is fixed though which makes sense. if the rental market continues to soften that assumption could be challenged and you could need to exit your investment at the absolute wrong time though
My sister has flipped and rented out a bunch of houses on the side (she’s a pilot) and she usually buys in the $800K - $1.5mm range and the tenants mostly are respectable people with good jobs and salaries.
I feel like going under that range means you have to deal with more BS and things of an unpredictable nature, yes?
She did get screwed in one 4BR place in some random state where it was 4 college kids in a nice place and they trashed the house.
Huh?
If you’re losing money every month, then why rent it out? Why not just sell it?
NYC RE is a capital appreciation bet, not a positive cash flow bet
how can a pilot afford a 1.5 mil house?
so true. rental yields are so low like around 3.5% and rental growth has gone up around 10%/year since 2012 despite lack of income growth. up to par with price appreicaition. while interest rates have risen 150 bps from the bottom and are around 5%. so its defintiely cash flow negative for the average place. but i like to be prepared. the time to prepare a roof is on a sunny day! lalalalala
Before the tax bill, if you bought NY apartments for cash, you would have generally earned 2% to 2.5% on your capital, which is close to the return for high grade bonds. So, if you were a rich Chinese investor or someone else who was parking your money in Manhattan, that would have been about the lowest yield you’d accept before looking elsewhere. The risk and illiquidity was the cost of potential future price appreciation. When borrowing costs exceed this yield, a leveraged investment in such properties obviously fails as an income investment and it becomes a speculative investment.
If you’d like my extended opinion, the effects of tax and mortgage changes probably have not been priced into the real estate market in NY and other north eastern states. People simply don’t sell in the short term for a loss, and realtors seem to blatantly manipulate prices with few restrictions. Some people even still believe that they will be able to “donate” money to a state run charity and deduct it from their local taxes, even though Mnuch is on to them. So the true price effects will only be visible in maybe 3-5 years.
she had up to about 10 houses at one point
shes a Captain - her husband is a Captain
'85 grad … she’s been doing it since the 90s
the first place she flipped, she made 300K profit in 2 years in Coronado, CA
She got hit in '08 or so like everyone else though in RE and downsized greatly … she had 1-2 illiquid properties for years
yep. thats what you do when you got a money loser. and this usually happens as rates rise. i know a guy with 5 mortgages in sf. 4 fixed 1 adjustable. his main home has an adjustable rate and the mortgage is like a mil mortgage. price of home is like 2 mil now. anyways, he noticed his costs rose as rates rose and he is unable to refi the main home. there is some weird arbitrary rule that prevents you once you have 5 mortgages.
in any case, prior to the rise i nrates, i told hi mto sell him the chepest home with the smallest gains. to lock in the fixed rate. he didnt want to cuz selling hte property woulda have cost him 100k in comission plus a tax on about 400k gains. so assume 20% tax , he doesnt live in it so thats another 80k in tax cost. for a total of 180k in cost to sell a home. now what are the effect of the rise in rates. consider a million mortgage, and it rose by 200 bps. that’s 20k/year. when he compared the two numbers he decided to hold, thinking that it cant be that bad.
anyways as you all know rates rose 150 bps, now he called me like a couple days ago and told me did exactly what i told him. he will use the proceeds to pay off the debt on his main home cuz well cash flow negative hurts :). no idea if he will pay off mortgage and relever.
i personally would not relever at these rates. but they are fair rates imo!
I’ve found this to be the case for most properties, which seems just insane for the average investor. NYC is not immune to declining prices. I’ve seen a few folks buy at a high price and then list like 20-30% higher 1-3 years later only to finally close something 0-10% higher. After closing and other costs, you’ve lost money.
Unless you’re doing some reno or have strong conviction on a neighborhood, you should try to find a way to make it work from a cash yield perspective. This is why there have been so many pure cash buyers in NYC; because the numbers just don’t work when you’re buying at a 1-3% cap and borrowing at 4-6%.
Yep, exactly. I heard the numbers work better once you go outside of the city to the cheaper commuter towns. But that creates difficulties in terms of maintenance (unless you are willing to hire maintenance companies that will eat into profit). Either way I am not interested…
bearish manhattan prices article:
Luxury Supply Is Still Growing as Sales Cool
• So far this year, more than 50 Manhattan owners have sold their properties for less than they paid, according to StreetEasy. The biggest loss recorded was $6.61 million.
• There were more than 100 Manhattan homes listed for $20 million or higher at the end of the third quarter, according to the Corcoran Group. On average, these homes sell at a rate of fewer than four a month.
• Some 1,775 new Manhattan condos are forecast to hit the market by the year end, said Corcoran Sunshine; in 2011, there were 277. Of the active condo listings already on the market, nearly 800 are listed for $5 million or more, up 61% from 462 in 2013.
• By the end of the third quarter, Manhattan apartment inventory rose 15% year-to-year, to 12,186, according to Corcoran Sunshine.
• By the third-quarter end, there were 992 Manhattan condo and co-op listings above $5 million, up 48% from the 2013 quarter, according to Corcoran Sunshine.
• The median sales price for a Manhattan home was $1.117 million in the third quarter, down 4.5% from the 2017 period. The median price of a new condo unit fell 9% to $2.55 million, according to Miller Samuel.
there was a dallas one a week ago too.
https://www.wsj.com/articles/the-u-s-housing-boom-is-coming-to-an-end-starting-in-dallas-1543248073
I get that people in NY have money, but current prices are above rational levels. It’s better to rent and not lock in risk in an illiquid long term asset. The other factors are foreign buyers, “pride of ownership”, and speculation of gains, but two of those are non existent now.