The hub

Inspection.

East end.

Site visit.

20 east end

Extension cords in air.

Lighting in West Stairwell.

Keep electric panels closed. 

Hanging fixtures in front of exit on 4th west.

Madison

Walkthrough

Madison

Keiran is the Forman.  Aubry is on vacation.

East end

Walk through.   Follow up to previous audit.
Appr 18 workers mostly on for 5, 6 and ground.

33 beekman

Real through.
Met with Mike.
Progress photos.
New ssp has been issued for the site.

Dealing with Unruly Owners

Is not uncommon to find s dilapidated building in ever neighborhood in nyc.  These buildings appear to

Deal Killers

In my experience, the number killer of all but a few of my deals has been in the owner renegging on the offering and trying to command more money.

In most cases it was like watching a captain go down with his ship. I have yet to master the art of coming in low. I guess they see deals going on around them and want full retail asking price for something requires substantial amount of work to be converted.

Investing Tools

In order to be a good investor you have to be knowledgeable, create a clear plan and execute each task, even if it feels like you are jumping off a cliff.  As Nike says "Just do it".

The following tools are the top of the line tools necessary to invest in New York City. Some of these are exclusive to New York City and most likley may not apply elsewhere.

Zillow.com
Every real estate agent hates Zillow. But don't worry about that. Zillow is a great tool to research recently sold properties. Although it appears credible, it is NOT a good tool for doing rental or purchase comps. Again, only use it for researching properties that have been sold.

OASISNYC.com
This is a magical web site. I couldn't be a real estate investor in New York City without it.  Use the map feature to do a property search. Once you ID the property, use the menu in the right hand column to look up property information. Everything form fines, to real estate transactions and tax records are available. It's awesome.

There are others similiar to Zillow including Property Shark and Trulia.com but for ease of use Zillow is easiest. Again, you are using it to comp recently sold and for sale more than anything else. You can't rely on the estimates they give you.

It's Electric

It takes years to learn the construction side of real estate.

If you have no experience, I recommend the first thing you do when inspecting a building is head to the electric meters and check out the electrical services. If they are new, great. If they are old, this may be a deal breaker.  By old we mean older than about 1985.  I won't get into amps and voltage supply but they make a huge difference on how many apartments or condos you can have and the holding costs of the building while waiting to get converted.

A turnover in ownership will require the building to be up to code. It could take ConEd a year or more to schedule an appointment to come in and update the electrical service. Check with ConEd before making an offer or at least put it in as a contingency in the offer letter.

If they can guarantee a date, great, make the offer. If not, walk away. You may never be able to have simple things such as air conditioning or luxury appliances without risk of blowing fuses in each apartment.

Proposal: 22 West 90th Street

As I was getting to know my investors (and they getting to know me) I presented each investment package in a formal plan. See attached Package.

Proposal: 542 West 110th Street

Here is actual correspondence between myself and an investor


*******,

I need to go see the attached property before i can give my opinion,
however this was forwarded to me by my Business Partner.   I will take
pictures upon your request.

In order to stay within your scope a single family home would be a
great option. the profits would be over $1 million; however, with the
air rights/FAR, profit potential and also based on location near
Columbia University, you can't go wrong as a hotel.

See attached and below:

Price   $3,650,000
Real Estate Taxes (per annum)    $9,285

Property Details
Type     Multi-Family Townhouse
Service Level    Voice Intercom
Block / Lot      1881 / 53
Age / Built      Post-war / 1988
Square Feet(Approximate)         5065
Lot Size         25'x70'
Built Size       25'x70'
Building Size    4 Floors / 4 Apts.
Building Access  Walk-up

This is a  25' wide, four (4) story modern townhouse built in 1988 by
Smith and Thompson Architects. Currently configured as 4 floor-through
apartments and a penthouse studio, the building could easily be
converted to a single family residence or expanded to accommodate a
larger structure. Plans have been prepared to construct two additional
stories and the building is framed to allow for the addition of an
elevator.

Alternate plans have been approved pursuant to NYC’s quality housing
regulations to construct a 13 story building which would expand the
maximum FAR of 7.20 or approx. 12,765 Sq. Ft.. The property benefits
from a tremendous amount of light, two south facing gardens, a
significant supply of excess air-rights, and excellent access to all
forms of transportation. The property will be delivered vacant and is
ideal for either conversion to a single family home or redevelopment
to a larger building.

Proposal: 228 E 75th

From: Rob Licopoli
Date: Tue, Sep 25, 2012 at 3:07 PM
Subject: 228 E 7th Street, Manhattan
To: *********


**********,

I've sent a seperate link with exterior photos. 228 E 75th is also in my neighborhood.  It is 20' wide with 10 apartments, 1 rent stabilized.  for an asking price of $3.3M. Expiration dates are favorable.  If this is being considered for a single family conversion then advice from an experienced RE attorney is recommended.

The acquisition costs is $3.3 million and conversion cost is less than $1.4 million w/o an elevator and 1.65 with an elevator.  The total investment of $4.5 million with a potential profit of $2.5 million.  

This is a gold mine!

Property Details

Type Income Property Low-rise Service Level Voice Intercom Block / Lot 1429 / 35 Age / Built Pre-war / 1910 Square Feet(Approximate) 5800 Lot Size 20'x100' Building Size 4 Floors / 10 Apts. Building Access Walk-up

This is a twenty (20) foot wide, four (4) story walk-up building containing ten (10) residential units, of which eight (8) units are one-bedrooms and two (2) are studios. One ground floor one-bedroom has full garden access. There are nine (9) Free Market units and one (1) Rent Stabilized unit. All units are currently occupied. The building measures approximately 5,800 square feet and has about 3,374 square feet of air rights remaining. 

The average rent per square foot is $42, which is under market, giving an investor long-term upside along with immediate cash flow. A new boiler (oil) was installed in 2001 and a new roof in 2011. Property is located near all Upper East Side transportation as well as the future 2nd Avenue Subway.

To Be An Agent or Not To Be?

In New York City, be a real estate agent. You will have exclusive access to real estate listings and owner information that can only be accessed through a brokerage.

To do this, look on craigslist for brokerages that are seeking to train agents and offer an incentive to do so. Make sure you don't have to pay a fee. At worst, pay the state required fees, but in some cases, brokerages will do this for you. Make sure you work out the hours they will require you to work before you commit. Nothing is truly free.

I don't recommend being an agent in any other state. You are restricted by the laws of all the states, but in NYC it's so restrictive that agents will take you for a ride in order to present you with a property. You can lose up to 6% of a deal or more if you have to go through another agent.

Investment Formula

Investors want to make as money as possible. In reality, if they make 25% return or better on their investment, they will be happy. In my experience, time isn't as much of a factor as you'd think. For example, if you can generate a 30% ROI (Return on Investment) over 6 months, that's better than 30% over 30 months; however, they will still accept this return.

It's best to calculate a range of ROI from 30% - 50%. If you call an investor and ask for $2 million to purchase a property and renovate it, they will expect somewhere between $2.6 million - $3 million back at the end of the project, whether it'd be 6 months or 18.

Everyday, you have to know 2 types of comps. Real Estate and Construction.  Real Estate comps are the "comparable" prices for finished properties in the neighborhoods you are looking.  A block to block comparison is better than a neighborhood based comparison or a borough based comparison.  For example,  SoHo or Tribeca investments are priced much higher than Brooklyn, Lower East side or Harlem. Always work the comps to be in your favor.  The seller will always work the comps to be in their favor.  Investors will do the same.  Be knowledgeable.

Construction comps are the cost of construction costs per square foot in NYC. There are huge differences for union and non union as well as low end or high end. I will tell you right now, never do low end. Always go big with quality and detail. It pays dividends in the end.

My investors want at least a 30% ROI (Return on Investment) but start at 50% high end ROI. Anything above 50% is unexpected and is a bonus. - and it usually means you mispriced the deal.  Missing an estimate on the high side can be as bad for your credibility as estimating to low of a profit.  It may seem like you were guessing.   Plan for 50%, settle for 30%.

I came up with the following formula after time.  This formula isn't designed to give you the profit, which is traditional in most formulas. This formula is deigned to determine the Acquisition Price. If you can't get the acquisition price, then the deal isn't worth it.  If you can get the acquisition price, you are certain to make a significant profit.  This needs to be black and white for investors.

Selling Price. In New York City, the selling price is going to be the neighborhood comps. Theres not too much you can do to drive up the selling price, even if you do high end fixtures and kitchen. Going high end simply beats out your competitors.  You may be able to go a little higher, but investors i've worked with don't buy into this. They always take the most conservative route.  Ultimately, you need to manifest what the profit will be. If you can't plan for the minimal ROI then don't do the deal.

S = Selling Price
C = Construction cost
A = Acquisition Price (Investment Price)
P1 - Profit at 30%
P2 = Profit at 50%

30% formula:
A= P1(S-C)

50% formula:
A=P2(S-C)

Finding Investors

Go to Craigslist, look under the section called Services Offered then Financial Services. Or you can also Google "real estate investors" or "lending brokers".

There are tons of lending brokers. They get paid when they get you an investment. They are on your side and will help you structure a deal for the investment pool. They will refer you to the right investor.  Because of state investing laws, they are State specific, so stay within your state when looking. Some are licensed in more than one state. You have to ask. They will usually tell you first thing.

I placed a link below (may die out over time) as well as a photo of their advertisement.  OK people - These ads are real. If you have a good investment, (30% or better ROI) then they will invest in you. If you have construction experience, you are qualified to manage this investment.  Know what you are talking about and there will be more investors than you can handle. See Investment formula to know how to put a deal together.

CLnew yorkmanhattanall services offeredfinancial services

Helpful Books

The following list contain a few of the books I've recently read. The more you read the better.  They not only help you get a better understanding of real estate investment but also helped build my confidence.

Public-Private Partnership Projects in Infrastructure by Jeffrey Delmon

This book explains how to work with government in real estate development. It's pretty good. What i got out of it was that there is no one way to work with the government.  Work to create a win-win scenario on each investment.

How to be a Real Estate Investor by Phil Pustejosky

Check it out on amazon including the reviews. Quite frankly I don't remember if it was good or bad.

Rookie To Riches: Wholesaling Real Estate by Michael Brandon

It was ok. It provided a real life scenario by a guy down and out on his luck. If he can be successful, you can too.

Real Estate Developer's Handbook by Tania Davis

It was good, but simple. This book convinced me that I was knowledgable enough to go out on my own. I didn't learn anything from it but did gain confident after reading it.

http://www.realestatedevelopmentcoach.com/ By Colm Dillon.

I bought this book written by Australian Developer, Colm Dillon. I contacted him about a question and he emailed me back right away. He's sort of like the Donald Trump of Australia.  This was the first developers book i read. It was good.  But the investment is now outdated.  I've since learned that the investment capital is there but not at 80/20. It's more like 60/40 where the investor will put 60% in on a deal to your 40% skin in the game.  for the other 40% you have to disclose they will have to take aa second lien position and offer 2x return on investment up to about 25% of their investment per project (up to 2 years - 30 months).

I read a book a week on average using the kindle app on my phone.  I find Biographies of successful entrepreneurs to be as helpful as industry specific books.

Note: I've also read most of Donald Trump's books. He doesn't really tell how to do something. He just tells what he did withouth going in to much detail. The thing to learn from THE Donald is you can wing it but stay focused on the goal. Having a goal is key. And also, never stop asking until you get what you want. 

Your Business Name

Your company name should say what you are and/or what you do.

"Smith Real Estate Investing, Inc.", for example, is a great name.  "Smith, Inc." is not.

Don't get caught up in catchy names or anything that may be trendy or novel. The more trendy or novel a name is the less it may be relevant down the road.  Keep it simple.

How to Use Credit

Credit should only be used for leverage not for cash.

For example, It's OK to use credit for an earnest payment when you put an offer in on a property, but only if you are 100% guaranteed to get back.

Another good use of credit is to cover expenses (high's and lows) against income you are guaranteed to get in. For example, if you have an investor that's contractually guaranteeing the purchase and construction of a project, you can keep a project moving by using a credit line to cover labor or material costs; but only if you trust the investor and they are proven to pay relatively on time on other projects.

If you are doing government work, certain agencies are known for not paying on time. Make sure you have an arrangement with the creditor that allows you to pay them when you get paid. In most cases they want at least an interest payment made on a monthly payment. Do you have the ability to make payments on the credit line if the investor is late? If not, don't use credit lines.  Let the project sit.

Never use credit to start your company, pay bills or other overhead, especially if you don't have steady income.

Establishing a Bank Account

Always Always Always keep personal banking separate from business banking. Once you mix the two it opens up a can of worms from a liability standpoint.

As you get started and before you start earning income, you will have to fund the expenses of starting a business.  It may seem silly to have to make a transfer from personal to business for a $10 per month web site payment. But in reality you need to transfer from personal to business first, then make the payment from business account. Again, if something goes wrong from a liability perspective, a plaintiff attorney will say you are doing business personally which makes you personally liable for business related debt.

There are two types of businesses bank accounts:  "Doing Business As" (DBA) and everything else.  A DBA is you doing a business in lieu of using your name. It's a separate account number but acts the same as a personal account. In New York State, you must register your DBA so do that first. See "Registering Your Business" Blog.

Always sign the checks in your business name, rather than your personal name. This may seem silly but just do it.  If someone questions or stops you, sign the business name first then your name as the Managing Director.

If you get the "everything else" account, this is a checking account in the name of your LLC or corporation. LLC is the way to go if you don't know what else to do. I recommend remaining a DBA until you actually make some cash then transferring over to an LLC simultanteous to taking a cash payment from your business. It only takes an hour or less to form an LLC in New York State.

Also, get your Tax ID. You don't need to be an LLC to get a Tax ID.  More on that in the "Registering Your Business" blog as well.

Open the account with about $100 and keep making owners equity deposits biweekly until you can cash out.  You will need about $1,000 - $5,000 in the account per year in order to cover overhead costs. Costs include your phone, transportation, insurance, professional fees, etc.  Anything you can charge to the business (legitimately), do it.

Creating a Legal Business Entity

If you feel confident about how to launch a business in New York State, go straight to the link and create your business.

Here's the link: http://www.dos.ny.gov/corps/

If you are new, don't get overwhelmed with the process.  New York State is a bitch to do business in. If you're not careful, they will bill you for not filing your taxes even if you don't have any revenue. The saying "if you can succeed here, you can succeed anywhere" is certainly true in business.

In order to register your business first choose your name. See our choosing your business name blog.  Next register it, preferably as a LLC.  This will give you instant credibility.

Follow the easy steps below. Don't get overwhelmed with reading everything. Keep it simple.

1) Do a name search:      http://www.dos.ny.gov/corps/bus_entity_search.html
If your name is available, Great!

2)  Get your tax ID: http://www.dos.ny.gov/corps/ein_taxnumbers.html
This is like a social security number for your business. Use it to seperate your business from personal. The government uses it to track the taxes you are responsible to pay as an employer and business owner.

3) Create your business:  http://www.dos.ny.gov/corps/llcguide.html
It's best to do an LLC.  This helps establish credibility and also begins the separation of personal from business liability.  You can form it the moment you are about to collect a payment.  You can do a DBA up until then. Lawyers may not like this advice. It really depends on when you begin to incur liability.

Be sure to set up a file at home and keep all of this in it.  I am in the habit of scanning everything and keeping it in my google drive.

Accounting Must Haves

In order to run a real business you need to watch your money to the penny. You must watch it everyday and be ready to balance the books. It used to be that you balance the books at the end of the month. As a person with ADD, I find it better to balance them everyday.  Before you say WTF, balancing can be automated through several tools.

Your banks online banking.
Depending on your bank, you will have an extensive online banking system that allows you to track your spending. This is important.

Quickbooksonline.com
Quickbooks is a pain in the ass, but its the lesser of all evils. Don't bother looking for free bookkeeping systems; they simply don't exist at the capacity you need.

If you plan to grow your business and eventually invest in yourself, you need to use quickbooks. The desk top version is recommend but I love the ease of use of the online version.   Quickbooks will allow you to export to Turbotax.

Turbotaxonline.com
You will love doing your taxes after you do them on Turbo Tax for the first time. Give it a try. Setting up the account is free and you only pay when you submit your taxes. Even then, if you are due a refund, they deduct the costs from your refund so you never actually have to come out of pocket. For as much as I think Intuit products are a pain, this product wins a huge kudos in my opinion.

Mint.com
Mint is great for tracking and categorizing expenses; however, even more importantly, they provide you with credible partner opportunities with creditors and other business related businesses.

It's free and subsidized by advertising. The ads are surprisingly relevant and are one of the few add driven web sites I actually use.

New York Real Estate Investing

I wrote this blog for friends and family and anyone else that's been picking my brain for how to do what I do. There's no secret.

There's no particular order, so i'd recommend reading the headings and figuring out where you are in the process.

The key to success is balance. Make sure you have a day job or other steady income before trying to do this. This is great for a stay at home mom or non working spouse.