Need Advice on a First Deal

[QueensKiddd]

I've found a studio apartment for sale in my area, which is Queens, NY. Its a Co-Op which the owner is trying to sell because of trouble paying the mortgage. Normally RE deals are way too expensive within the five boroughs of New York City, but with this bad market I'm getting a ridiculously low price.

It is an L shaped studio apartment in a twelve story building. It has hardwood floor, the building has two elevators, and a doorman. Its in a great location, only two blocks from the subway station. No repairs needed.

The price of the Co-Op is only: $59,999
The Monthly maintenance fee: $396

The Average Monthly Rent for similar apartments: $700 to $1000

This is my first RE investment. If anybody could give me some advice on whether or not its a good deal, I would appreciate that.

 

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[Runum]

QueensKiddd we're glad you made it here. This is a tough question for us to answer because we don't know you or your situation.

You have to answer a lot of questions for yourself. Can you get financing? How much down? What will the interest rate be? What are the taxes and HOA fees? What do you want the property to do for you? Are you going to manage it?

If you will please post and introduction for yourself with some background info in the appropriate section it will help us help you. Thanks:cheers:

 

[servicefly]

Most of my RE Investor friends and clients say one thing in common with one another:

"When starting out, find the crappiest RE in the best neighborhood."

The neighborhood should appreciate the value, all you have to do is match the apartment to the neighborhood value. Oh, and watch out for RE deals too good to be true. Due Diligence is the best defense.

Disclaimer: I have not made money in RE investing. Someday I will enter the that game.

 

[Yankees338]

How will this be purchased? Have you been pre-approved for a mortgage?

What are the terms of the deal? Where is the down-payment coming from/how much is the down?

Do you have a plan, or did you just stumble upon something you thought would be a good move?

 

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[Kontis]

First off, is this short term or long term? If it is for a long term investment, find out if the board will allow you to sublet. Most coop's in Queens & Nassau county do not allow you to sublet and if you must (because of travel or going away for a year on business, etc.). If the board approves, they will grant you a pass and you can't sublet for more than 1-2 years consecutively.

Personally - In Queens I would not buy and flip because there are many coop/condo deals on the market right now in prime areas of Queens.

Good luck!

 

[QueensKiddd]

This is my first deal. I was planning on putting down 20 to 25% and only taking a mortgage for about $45,000. I'm pre-approved for much more than that amount and so that won't be a problem. The interest rate will be around 6%. The taxes for the property are included in the monthly maintenance. I was thinking I could purchase the co-op, rent it out and have it pay for itself. Then flip it once the market straightens out after a few years. I can hopefully make money on the increase in property value, as well as the equity that builds up by then. The Co-op board allows rentals of properties, so that won't be a problem. I'm just not sure if its worth it considering I won't have any cash flow, and I'll be investing close to $15,000 of my own money.

 

[Yankees338]

This is my first deal. I was planning on putting down 20 to 25% and only taking a mortgage for about $45,000. I'm pre-approved for much more than that amount and so that won't be a problem. The interest rate will be around 6%. The taxes for the property are included in the monthly maintenance. I was thinking I could purchase the co-op, rent it out and have it pay for itself. Then flip it once the market straightens out after a few years. I can hopefully make money on the increase in property value, as well as the equity that builds up by then. The Co-op board allows rentals of properties, so that won't be a problem. I'm just not sure if its worth it considering I won't have any cash flow, and I'll be investing close to $15,000 of my own money.

6%? Does the bank know this will be an investment and not an owner occupied property?

I think the cashflow question comes down to your plan. Will you be rapidly increasing your RE holdings, or will this just be a little extra something to work with? Will you need this money for anything else? What is the opportunity cost of this deal (is there something you'd be able to do with this money instead that would yield a better return?)?

Just a few things to consider from an RE newbie.

 

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[QueensKiddd]

The bank doesn't know that this will be an investment property. Does it really make a difference? Also isn't it harder to get a mortgage for investment property?

As far as the opportunity cost, I'll be taking this money out of my stock account. The market has been doing horrible lately and so I sold a lot of my investments and have free cash. I don't think the market could get me a better return right now.

 

[Yankees338]

The bank doesn't know that this will be an investment property. Does it really make a difference? Also isn't it harder to get a mortgage for investment property?

As far as the opportunity cost, I'll be taking this money out of my stock account. The market has been doing horrible lately and so I sold a lot of my investments and have free cash. I don't think the market could get me a better return right now.

I could be wrong, but I think that you need to live in the property for a specified amount of time to lock in that interest rate -- otherwise, it's mortgage fraud.

 

[MrPink]

The bank doesn't know that this will be an investment property. Does it really make a difference?

You will be committing fraud at closing if you state that the property is your personal residence and it is not true. The issue will again show up when you are getting insurance for the property.

As far as the opportunity cost, I'll be taking this money out of my stock account. The market has been doing horrible lately and so I sold a lot of my investments and have free cash. I don't think the market could get me a better return right now.

I thought the idea behind the stock market was to buy low and sell high. I don't know if this is the low are not, but since we are down around 25 percent one should at least consider it 'on sale'.

 

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[servicefly]

I hope most of you are not going crazy because the media is hyping the Stock Market DOW dropping. All professional traders and sophisticated investors know that when the Stock Market is dynamic; this is the time to get your money moving. Putting your money in the Stock Market to sit in an index fund or IRA or etc. is slow lane investing.

Buying low and selling high is good, but shorting, options, LEAP options are just some of the strategies to Stock market investing. Remember, this forum is called The Fastlane to Millions.

 

[QueensKiddd]

I haven't been on the site for a while. In hindsight, it's funny to look back and see what others were posting in 2008 regarding the stock market.

In response to MrPink & ServiceFly, I hope the both of you weren't trying to "buy low" in 2008 LOL.

I trade equities for a living at a major hedge fund. We saw the market crash coming in 2008. While you were recommending that we shouldn't be selling low, we had already been moving to cash earlier that year (in addition to putting on short positions). It wasn't until early 2009 that I covered my shorts, and went long when I saw the trend change and the market bottoming out.

Trading Rule #1: You never try and buy a falling market, just like you don't try to catch a falling knife. "The trend is your friend, until it bends." You should only trade in the direction that the market is moving in. In 2008, the market was declining on huge volume. The smart money was putting on short positions, while retail investors were buying. You never fight the trend and buy a falling knife.

Rule #2: Always keep your losses small. If you ride your winners, and cut your losers, you'll always be profitable.
Retail investors get killed trading stocks because they do the exact opposite. When they're making money in a stock, they get anxious and their first instinct is to sell (at a small profit).
When they're losing money in a stock, their instincts tell them to keep buying and averaging down. They hold their losing positions because they don't want to admit they were wrong. Rather than take a small loss and get out of a stock, they ride their losses to the point where its unbearable and they're forced to sell (with a huge loss).
One of the most important rules of trading is to always make sure that your profitable trades are far larger than your unprofitable trades. Keep your losses tight. Traders always say "if you don't lose money, eventually you'll make money."

This isn't a buy and hold market. This is a trader's market. Worry about the losses, and the profits will come on their own!

Good Luck to all!