$300k in Cash, how to get started in NY?
Hello, if you had $300k and you wanted to get started in mixed use real estate or multi-family real estate, what would be the first step to obtaining funding?
[{"id": "fuqqm3b", "text": "Well, $300k is your down payment and closing costs on ~1-1.2m in real estate.  Where in NY?  NYC, upstate, etc?\n\n1-1.2m is a pretty damn solid starting point for the right type of property.  Can give more detailed guidance once you let us know your market, what you're looking to accomplish, etc.", "replies": [{"id": "futbj0c", "text": "I'm thinking Brooklyn / Queens, and I'm looking at either mixed use or multi-family.  Preferably larger.", "replies": [{"id": "futcuyx", "text": "We haven't made an acquisition in Brooklyn or queens in the past 3ish years, but honestly, going to have a hard time finding a quality 3- or 4-unit at that price.  Unfortunately duplexes don't pull in enough (imo) to justify the price.  At that price you're likely looking fairly far out in either borough and/or finding something that needs a complete rehab to make rentable.\n\nCan't comment on mixed use as it's not our focus area.", "replies": [{"id": "futemwp", "text": "https://www.mlsli.com/homes-for-sale/1401-Avenue-Y-Brooklyn-NY-11235-271232104\n\nGravesend\n\nNot too bad.  Tons of 4 families in the $1.5m - $2m price range and rents carry them.", "replies": [{"id": "futeu3c", "text": "What's the rent roll?  Any catches on this one re: rent stabilization?  Are you local - if not NYC property management tends to both be subpar and fairly expensive.\n\nI'll add, NYC realtors are typically way too aggressive when listing rent roll/potential rent roll for a property.\n\nEdit: that buildings also appears to have been listed on and off in a likely post-renovation state since 2016...a bit sketchy.", "replies": [{"id": "futg51w", "text": "just a sample, give it a look yourself on mlsli.com\n\nrent rolls carry quite a few of these places -- the not rent controlled ones", "replies": [{"id": "futgb9z", "text": "I'm a big fan of NYC.  We have several properties around Bushwick that we got into years ago.  Not sure at this point I'd invest further though for the aforementioned reasons - notably lack of quality PM, costs involved, and things just being far too tenant friendly and getting worse every year.", "replies": [{"id": "futgt4y", "text": "all good points", "replies": [], "depth": 8}, {"id": "futgtzp", "text": "how do you manage the real estate?", "replies": [], "depth": 8}, {"id": "fvyzs93", "text": "This right here. And it will all continue to get worse over the next few years.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fuqr9z8", "text": "1) talk to commercial bankers to get an idea what kind of loan they're willing to give you. Most likely 65% LTV\n2) talk to high net worth individuals to invest $2.7m with you cuz you'll put up the other 10% to get to $3m equity.\n3) charge a $300k acquisition fee. Keep your original 300k and spend it on Nintendo switch games.\n4) purchase $9m penthouse with your newly secured financing\n5) throw a party with celebs in the penthouse\n6) convince one of them to buy it for $10m, collect a broker's fee of 300k.\n7) resell Nintendo switches for massive profit\n8) repeat but add another 0 on every number.\n\nSource: Loosely based on a true story from shit I've seen doing NYC real estate development", "replies": [{"id": "fuqwuj6", "text": "That's next level.", "replies": [{"id": "fur7ttm", "text": "that's next level *business* my guy", "replies": [], "depth": 3}], "depth": 2}, {"id": "futbgl6", "text": "I won't say the Art of the Deal says it much differently ;)\n\nThanks for your post", "replies": [], "depth": 2}, {"id": "fv3gmbz", "text": "r/oddlyspecific", "replies": [], "depth": 2}], "depth": 1}, {"id": "fur2s9j", "text": "Upstate.  Not near NYC route 9 small towns.", "replies": [{"id": "futbccm", "text": "I'm definitely interested in NYC", "replies": [], "depth": 2}], "depth": 1}, {"id": "fur4gt1", "text": "What kind of return are you expecting? Also, can you give a sense for you risk tolerance at this stage? If tolerance is very low, maybe find a 2-4 unit property and pay cash. no loan = very low risk and a reliable return. $300k can go very far if you want to max out leverage on your acquisition.", "replies": [{"id": "futbbjy", "text": "A 4 unit building in Brooklyn is around $1.7m.  What's the max leverage I can obtain?  I wouldn't mind trying to pick up a 12 unit, or 20 unit building.  I'm unsure how to go about obtaining financing.", "replies": [{"id": "futesrr", "text": "Oh i see. I misread the thread earlier and thought you were looking upstate. \n\nSo, it might be a bit of a challenge to get financing in this market for your first acquisition, but you have a nice amount of cash to get you started. Assuming you are financially stable and have good credit, income from your job, etc., you can overcome those hurdles with relative ease. \n\nTypically commercial deals will be financed with 60-75% leverage. you will be hard pressed to find an 80% deal unless your personal financial situation and experience is strong. \n\nA few of the larger national banks (Chase, Wells, BofA) have small loan programs within their commercial real estate teams that would be able to field your request, so i\u2019d do some research there to find potential bankers. Your current bank may also be a good route if you have a history there as well. Keep in mind that smaller/regional banks (M&amp;T, Santander, Valley National) are balance sheet lenders and seek to only work with well experienced, deep-pocketed investors, so don\u2019t be discouraged if you get turned down in your search. \n\nBelow are a few items lenders are going to ask your for/want to see in a deal you bring to them. If you can have these items prepared they will appreciate the info being readily available.\n\n1. They are going to want to know your net worth and liquidity, net of the cash you will be putting into this transaction. Ideally your net worth will equal the loan amount and liquidity will be ~10%, so be mindful of how much of your current cash you put into this deal. \n\n2. Your lender will need to analyze the cash flow to determine whether the property you find will cover the debt comfortably, typically NOI should\nequal at least 1.2x the debt payment. If you are able to put together a package showing your analysis with supporting excel files to provide to your lender, it will go a long way in showing your ability to understand the financial aspect of the deal, and will just plain make their life easier. Both will work in your favor. \n\nHope this helps.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "furvndh", "text": "If you know people willing to invest you can easily get started with a nice 6 unit building in Brooklyn or queens. If your looking to go with out investors you can probably do a small deal in the Bronx for 6-700k range and get another 200k for renovations.", "replies": [{"id": "futb3fh", "text": "What do you mean by, \"If you know people...\"?  Is there any avenue through a more profession mean than seeking out person friends as investors?  Also, I don't think the Bronx is a winning solution.", "replies": [], "depth": 2}], "depth": 1}, {"id": "futbzy5", "text": "If you have access to investors... the Bronx is a very hot market right now. Probably the most activity in all nyc but it\u2019s not for everyone.", "replies": [{"id": "futc964", "text": "Yeah, I demoed two buildings up in that neck of the woods.  They were old brick condemned buildings, three stories each, down the street from the St. Nicolas Housing Projects to the East and a massive meth clinic to the West.\n\nUnfortunately the average person doesn't like living in a wasteland -- the Bronx is out my friend.  It's up there with Rockaway.  Any place that looks like Beirut or Somalia is out of the question.\n\nHave you been there since the riots started?", "replies": [], "depth": 2}], "depth": 1}, {"id": "futcbph", "text": "There are equity brokers who can help raise equity for your deals but that also costs $$.  The other option is to be a limited partner on someone else\u2019s deal and just be passive.", "replies": [{"id": "futeq97", "text": "Equity brokers... can you embellish?  I haven't done any reading or research on equity brokers.", "replies": [], "depth": 2}], "depth": 1}, {"id": "futd15v", "text": "Lol I hear that. No and I don\u2019t plan to go anytime soon. But to respond to your point, real estate is along game. I would not let today\u2019s political or economical issues stop you from buying a good deal. If you can get good financing on 10 year money you will be in great shape.", "replies": [{"id": "fute62q", "text": "It isn't worth it though.  Imagine your section 8 tenant calling you up saying he can't pay rent because the sink is broken, you get there and the sink is smashed apart.  Oh yeah -- and you can't park your truck because it's NYC so you just double park and get tickets.\n\nOwning real estate in trashy neighborhoods isn't an investment it's a liability.  Nothing good comes from bad neighborhoods, particularly real estate.", "replies": [], "depth": 2}, {"id": "futgpfl", "text": "true.  always the long game.  With the uber diverse areas claiming gentrification it's tough -- these current riots are going to chase the hipsters out of all the gentrified areas.  When a hipster from Colorado gets raped once a week in a particular neighborhood, the gentrification argument is a challenging one to prop up.  Additionally, Trump's tax revisions are crushing some of the areas with higher property tax (such as NYC).  There's a lot going on but cashflow has to remain number 2 to the decency of the neighborhood.", "replies": [], "depth": 2}], "depth": 1}, {"id": "futegyq", "text": "I have a lot of extremely wealthy clients who would beg to differ but I totaly understand where you are coming from.", "replies": [{"id": "futgfy3", "text": "Interesting to hear, no one I know in the game has particular faith in the Bronx.  They actually speak very negatively of the speculation in diverse and unproductive areas -- including Rockaway and Bedstuy.  There's more promise in Gravesend, Brighton Beach, Maspeth, etc...", "replies": [], "depth": 2}], "depth": 1}]