Affording a multifamily? (New York, Bath, York: apartments, rental, credit)

[likeminas]

Originally Posted by It'sAutomatic

I'm set on being a landlord because people pay a huge premium to only maintain one property. It seems to me that it's about 2-2.5x the cost per unit for the privelage of not having tenants. I am very handy with things and do my own repairs in my current apartment that I am renting. I'm looking to live in the building (and thus not be a slumlord), I was merely trying to emphasize that I'm not looking for a fancy place with high-end finishes or anything. I know that Manhattan is expensive, but I know it's not all million dollar condos out there because I have looked. Ideally I would be making at least 80k, possibly more if I can get certain promotions, but I haven't looked deeply into the availability of positions as a process engineer in NYC. The biggest hurdle for me will be the down payment, but I already have some money saved, and I might be able to borrow some of it from family.

When in the begining you said you wanted to buy a two family house,
I thought you were over reaching.
Now you're talking about buying an entire building?!?!?!?

Did you know what NYC is one of the most (if not the most) pricey RE geographical area in the U.S?

Buldings in most areas of NYC go for 1 million and up.
And assuming the bank would even consider you for a loan, you would still have to come up with the 200K cash needed for a down-payment?

I'm afraid you don't know RE prices in NYC, so I would suggest checking out prices on Trulia or Zillow so at least you can get a rough idea of what they are.

[bellakin123]

Originally Posted by It'sAutomatic

I'm set on being a landlord because people pay a huge premium to only maintain one property. It seems to me that it's about 2-2.5x the cost per unit for the privelage of not having tenants. I am very handy with things and do my own repairs in my current apartment that I am renting. I'm looking to live in the building (and thus not be a slumlord), I was merely trying to emphasize that I'm not looking for a fancy place with high-end finishes or anything. I know that Manhattan is expensive, but I know it's not all million dollar condos out there because I have looked. Ideally I would be making at least 80k, possibly more if I can get certain promotions, but I haven't looked deeply into the availability of positions as a process engineer in NYC. The biggest hurdle for me will be the down payment, but I already have some money saved, and I might be able to borrow some of it from family.

What is your future occupation going to be? Have you looked at the average salaries in NYC? There have been lots of layoffs again in NYC. Even if you're making $80k by yourself, you won't be able to maintain it. You may not even get a mortgage approved. I don't know anyone who makes less than $80k a year and approved for a mortgage unless it's a reasonable condo/co-op. The lenders are scrutinizing every penny that goes in your account. If your parents lend you part of the down payment, they are going to factor in you paying them back along with making mortgage payments. You'll need a sizeable reserve in case you have tenants that don't pay the rent. You may be handy but can you fix a boiler or furnace for a multiunit apartment building? If you're working, who is going to fix a problem even though you're living in the building? If I'm your tenant and there's a leak NOW, I'm not waiting for you to come look at when you get home from work. What if you're stuck at work and can't get to the apartment? Just something to think about. Look into finding the job first and get hired then decide if you want to own a building.

[charmed hour]

Unfortunately, I agree with the other posters. Living in a 2 family home in the Bronx, our property is worth nearly $1 million. Smaller apartment buildings are at least 1 1/2 times that.

With an 80K income, no bank is going to give you a mortgage in the $1-2 million range. Perhaps you should start with a small 2 family home and work your way up to something larger.

[JayBrown80]

Originally Posted by It'sAutomatic

I'm set on being a landlord because people pay a huge premium to only maintain one property. It seems to me that it's about 2-2.5x the cost per unit for the privelage of not having tenants. I am very handy with things and do my own repairs in my current apartment that I am renting. I'm looking to live in the building (and thus not be a slumlord), I was merely trying to emphasize that I'm not looking for a fancy place with high-end finishes or anything. I know that Manhattan is expensive, but I know it's not all million dollar condos out there because I have looked. Ideally I would be making at least 80k, possibly more if I can get certain promotions, but I haven't looked deeply into the availability of positions as a process engineer in NYC. The biggest hurdle for me will be the down payment, but I already have some money saved, and I might be able to borrow some of it from family.

I think it's commendable that you are trying to make such a big start in life and are willing to shoulder the responsibility of an income property.

That said....NYC is the absolute WORST place to do that in. You have no experience as a landlord, the rental laws in NYC are HEAVILY tenant favored, and you will have many other stressors in your life, including living in an unfamiliar city and having a new job.

Also, the Down payment is not your biggest issue. It's your credit worthiness. A bank would not want to lend you money for a multi-family property even if you had 50% down, unless you have amazing credit or some type of experience running a property. Banks view multi-family properties like buisnesses. They wouldnt loan you money to open a restaurant if you had no experience in the food industry. You are not a landlord yet, but you want to cut your teeth on that industry in the most competitive city in America for landlords. Graduate from the minor leagues before you turn pro.

I hope everything works out for you. If I were you, and I admit I am not, then I would get my feet wet in NYC. Learn the neighborhoods. Learn the rental laws. Be a tenant yourself for a while, so you can understand the mindsets and the needs. Get established in your job. THEN, if you still want too, and are planning on staying in NYC for about 10 years more, THEN buy a multi-family unit. Don't buy a unit, have to move back to Chicago, and then try to run it when you are 800 miles away.

I know when you look at making money and look at percentages of earned income, it seems like the sooner you start, the more money you will make. But in this case, I think it's okay to wait a few years. What you might lose in income for that 2 years will be more than made up for by the money you WON'T lose to lawsuits or buying the wrong property, or having a deadbeat tenant.

Good luck!

[tkak69]

Yes, it's possible, but you are not even close to asking the right questions nor are you providing the right information to get good feedback. Therefore, I suspect you are not that serious. As a previous poster points out with your salary, you'd need about an 800K down payment to get into Greenpoint and more for Manhattan.

That being said it is possible and can be an excellent strategy. I.e., last year I bought a large 3-family in Bushwick, fully renovated, for $575K, on the L train, my tenants pay my mortgage, and I enjoy a large 1800 sq foot duplex with a backyard and roof terrace. I have the skill and maturity to be a good landlord (I'm 42), but I'm not sure I would have been ready to tackle this ten years ago. There are a lot of expenses and a lot of work that has to go into it. The neighborhood has another 3-5 years before my mom will be comfortable visiting. But the changes are taking place rapidly. All in all, I'm still paying far less than comparable rent I'd have to pay for the house I live in and I'm accumulating equity and getting a nice tax break. Some days I pinch myself, I'm so happy. My advice is to 1) get serious, and do a lot more research about NYC real estate 2) look for emerging neighborhoods and 3) keep dreaming about it and asking questions. It's a great strategy and you can make it work if you are serious and realistic and willing to work for it.

[Alkonost]

Originally Posted by It'sAutomatic

I'm set on being a landlord because people pay a huge premium to only maintain one property. It seems to me that it's about 2-2.5x the cost per unit for the privelage of not having tenants.

You're grossly underestimating what the land itself is worth when it comes to a multi-family house or a small building. I don't think the numbers you have in mind are what you're going to find available.

Originally Posted by It'sAutomatic

I am very handy with things and do my own repairs in my current apartment that I am renting. I'm looking to live in the building (and thus not be a slumlord), I was merely trying to emphasize that I'm not looking for a fancy place with high-end finishes or anything.

Even dumps cost millions in NYC. It's not about the finishes, it's about the value of the land the place is sitting on. All the land in NYC has been developed, high demand and low supply means even small buildings and homes start in the millions of dollars. This isn't 1970 when squatters were able to take over derelict townhouses around Thompkins Square Park for a few bucks- those days are LONG gone.

Originally Posted by It'sAutomatic

I know that Manhattan is expensive, but I know it's not all million dollar condos out there because I have looked. Ideally I would be making at least 80k, possibly more if I can get certain promotions, but I haven't looked deeply into the availability of positions as a process engineer in NYC. The biggest hurdle for me will be the down payment, but I already have some money saved, and I might be able to borrow some of it from family.

Hey kid, it's good to have big dreams but it's not just condos that are over-priced- any land in Manhattan will cost you millions. You haven't done enough homework on what the cost of real estate is. BK and Queens might be more realistic if you can get a large down-payment together, but you still need to be making six figures to get any kind of mortgage approved for the amount you're going to be looking at. 80k won't cut the mustard even for an entry-level property.

If you're already in Chicago, maybe look around there? The real estate prices aren't as steep and you may have better luck starting out as a small landlord there.

[jeffcon0]

Short answer: Not a chance in hell.

Long answer: I think you are grossly underestimating the cost of purchasing multi-unit properties in NYC. In Manhattan for something that isn't crumbling you're looking at over a million ANYWHERE. In many cases it would be multiple millions. Greenpoint you might be able to find a 3 unit multifamily for maybe 800 - 900k. One thing you need to understand is that this is not like rental markets in other parts of the county. You might have trouble covering your monthly nut with the rents you can get in most places. Most landlords that own mult-unit properties fall into one of these categories:
1) They've owned their property since the bad old days and probably got it for a song and are now reaping the benefits of the inflated prices.
2) They're a large company who has the benefit of scale on their side so they can work of smaller margins.
3) They are a family who offsets their costs with a rental unit or two that may or may not break even.

Fact is nobody is going to lend you the kind of money you need in the current climate and with the salary you're speculating you *might* get. If you have a three year work history, good credit, a reasonable down payment, and monthly income to cover the mortgage you can probably get approved for about 3-4x your annual income. With 60k that will get you a 1 bedroom in Canarsie. Welcome to NY.

[Kefir King]

I don't think it is doable on $60,000 with little work history unless you can get a family member to lend you the money or float your mortgage.

Your situation will not impress any banks.

[SobroGuy]

Even if you have the sufficient funds, owning a 3 family is a labor intensive endeavor. In theory your tenants will pay your mortgage, but what about when the apt is vacant, how long can you go without income? You will get the inevitable deadbeat tenant who will drag things through court and not pay...can you withstand that financial hit as well as the psychological effect of seeing someone smile happily in your building, not paying rent, for months and months, and you can't do anything about it? People skills and a certain type of personality are essential when dealing with people on a daily basis, their idiosynchracies and downright lunacy (listening to Jay-Z at 2 am from your upstairs tenant gets old fast). Strange people coming in and out of your building, people leaving garbage in the hallways, smoking, leaving doors unlocked, allowing people who don't live in the building access/keys, city inspectors and the fines that go with them, and on and on. Can you handle it?

Are you handy? Otherwise the recurring things that need fixings, from a simple clogged faucet/drain to as complex as a caved in ceiling from a roof leak will be your problem 24 hours a day, 7 days a week. Knowing a great handyman who can come for even small items will make your life 1000x better.

You will enjoy such pleasures as nonstop complaints to sanitation because they don't pick up your trash/recyclables, and will be fighting fines for litter, incorrect recycling, and any other infraction the city can make money off of.

Sound wonderful yet? What's worse is when you buy a building with tenants already in there...you are stuck with whatever problems (financial/social etc), and could spend years trying to get people out.

The idea of owning a 3 family and "living free while the tenants pay your mortgage" is a fantasy sold by realtors. It is really a fulltime job running, managing, and repairing your building, nevermind paying for it. I think the longterm rewards are there, otherwise I would not be doing it, but people greatly underestimate the amount of work involved, the actual costs besides the mortgage, and the challenges dealing with people who live essentially with you.

It only takes one bad experience with one bad tenant to scare people away from ever owning a rental property in NYC. Beware!

[mathjak107]

can you also support going a few months without rent if a tenant sticks you? or the new boiler or roof if it goes? legal fees when need? replacement of appliances ?

the list is endless and most landlords underestimate whats need in cash flow.