Investment Buy?
Time to tap this knowledge pool… Since we have decided to rent in Brownstone Brooklyn (couldn’t afford to buy the space that we need) we still have our “house fund” sitting in the bank. This past tax season has proven that 3 kids just don’t provide enough deductions so we are thinking of buying something…
Time to tap this knowledge pool…
Since we have decided to rent in Brownstone Brooklyn (couldn’t afford to buy the space that we need) we still have our “house fund” sitting in the bank. This past tax season has proven that 3 kids just don’t provide enough deductions so we are thinking of buying something to rent out.
My questions are many, including:
– is this a good idea at all?
– with a budget of no more than 325K, where should we be looking?
– should we bother looking at studios or are 1BRs that much better of an investment?
– Anyone want to sell their place but still want to live there? (hey, you never know!)
Many thanks in advance for your 2 cents.
With a budget of only 325k, I would consider any investment that broke even or netted 200-300 a best case scenario. unforunately to make money in real estate, you need money.
Being an investment property owner myself, I can speak from personal knowledge that generally speaking, an investment property needs to have at least 3 units to net a profit. The reason being the second, third, or fourth units come at a marginally lower amount. I.e. a 1 family costing 500k, 2 family costing 750k, 3 family costing 900k. The expenses stay relatively the same for all three properties while the rental income triples. Along this line of reasoning, a one br can never really turn a profit since you still need to pay taxes, heat, hot water, mtg, etc.
I believe condos can be bought in east williamsburg for 300k or so. A new construction 1 br should rent out for 1500-1800 and assuming you down 20%, you come close to breaking even. Good luck!
A three family needing no repairs will cost at least $500,000 in any neighborhood in Brooklyn, including East New York.
OP can afford a studio or one bedroom in Manhattan, Jackson Heights, etc. I would say go for it if you think prices will appreciate 40 percent or more in three years. But I highly doubt that is the case.
What about Wine Lover’s idea of a proper two bedroom pre-war apartment in Kensington, to live in? You can also find post-war two bedrooms for that price in the non-landmarked areas of Jackson Heights. Those are decent areas with decent schools.
“…unless something really really good comes up…”
If you can buy something for 10x rent roll then go for it.
The daveinbedstuy offer is a horrible investment idea at 20 x RR. If you wanted to live there in a couple of years when he moves out or when you don’t renew his lease it might be a good deal at 15 x RR.
Do not invest in real estate….unless something really really good comes up. davidinbedsty offer to buy his place is a horrible idea(I know its a mute point since your limit is 325k)….only because he can leave after his 2 year lease is up and your stuck with an overpriced property in bedstuy
if you still have tons of cash left after buying the 325k investmt ppty, fine. if not, forget it. keep that cash handy for unexpected stuff that happens in life.
If $325k is the budget for the purchase price, forget about looking at any new construction where there’s a tax abatement. You’ll get killed once the taxes adjust back up. Also be very, very wary of new construction in general unless you can fully vett the contractor and he has a long history of previous quality work.
buy a three family in a depressed but still expensive neighborhood, join the section 8 program. guaranteed rent, and section 8 apartments get you top dollar, sometimes more than market rate (which is why a lot of people get annoyed by landlords who turn their properties into section 8) but it is guaranteed income as you get a check from the government every month and the tenants pay a teeny tiny fraction of it. you might also get more in section 8 and more house in NJ/Penn/upstate new york. do a little googling about it the section 8 program. it nets a lot of people lots of money. unfortunately it steals a lot of taxpayers too. double edged sword. and make sure to buy in a neighborhood where most of the block is already section 8 housing lest you WILL be hated. there are some decent section 8 tenants out there, but most really do suck. but it’s more money than you can get market rate in a lot of areas and guaranteed.
*rob*
daveinbedstuy has it right: on investment property you deduct pretty every cent you spend on it. No way future tax laws will change that.
Also depreciation on a 325k property will be 10k year and if your rental doesn’t make that much net income (which it won’t) you can (check this with your accountant) deduct the remaining depreciation from your regular income: not bad.
Cons:
– being a landlord is more work than most think.
– the margins on flats are not as good as margins on buildings where you are in control of all aspects of management and maintenance.
In conclusion, while i think there is still plenty of money to be made from restate investments done right, buying a studio or 1br in Brooklyn right now is probably not the safest way to invest.
If you decide to go for it anyway, i would highly recommend that you look into buying in Manhattan rather than Brooklyn. And yes, it might take some time and research, but you can buy in manhattan with 325k.
good luck
never mind, i was answering it as if you wanted to live there. sorry, already drinking.