Author Topic: $$ Into NYC Home Partnership or Stay With Vanguard?  (Read 234 times)

mookie

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$$ Into NYC Home Partnership or Stay With Vanguard?
« on: August 09, 2018, 07:22:10 AM »
We live in a multifamily property in Brooklyn with subsidized rent-mortgage about $1200 below market in exchange for managing the property. We have a minority ownership stake in the property from sweat equity, and our investing partner is amenable to us increasing our equity. The property has gone from $1.16 million a dozen years ago to $2 million. I think there will be continued growth but unlikely to match the initial dozen years. I'm wondering if it's a good idea to invest more (100-120k) in the property or better to leave things simple in index funds. On one hand this seems like an easy opportunity to build equity in a very good property. However, I have a more FIRE bent than my spouse and am reluctant to put more liquid money into the property. I would love to FIRE in 10-15 years. Thank you for any thoughts!

We are 40yo with two little kids.

Gross Salary/Wages: 280,000
Married Filing Separately due to PSLF.

Current joint expenses not including school loans: 6900/mo
monthly food/household/travel/other: 1500
childcare: 3000 hopefully going down in 1-2 years
housing: 2400
We are maxing out three retirement funds annually (~54000)

Assets:  793,000 (608,000 retirement, 185,000 nonretirement)
Roth: 107,000
401k: 501,000
non-retirement mutual funds/bonds: 160,000
(above are in 90% index funds and 10% bonds)
Berkshire Hathaway B: 5000
Cash: 20,000
 
Liabilities: 248,000
School loans
$78,000 balance -  $1200/mo, 3%, receive 50% of this refunded from graduate school bc of public service work
$170,000 balance - $790/mo, 7%. Three years left for PSLF program. 

No credit card debt.

Property Details:
Market Value: 2 million
Original Purchase price: 1.16 million

Original Mortgage Amount: 930,000
Interest Rate: 4.125
Mortgage Term: 30
Term remaining: 18
Amount remaining on mortgage: 876,000

HELOC  matures 2048
(forgive me if details left out, I don't really understand HELOCs) 
Principal: 317000
Monthly payment: 1800
APR: 5.125

Current equity for my family is 167,000 (20% of 837000) .

Gross Rents: 98,000 annually
Taxes: 5000 annually
Net Cash Flow: 7000 annually, sometimes annually dispersed to partners

 
Specific Question(s):

What other questions should we be asking about the property to better evaluate the investment?

Should we put more money into this current investment/home? 
If yes, what's a reasonable amount? We were thinking 100-120,000 from the non-retirement funds.

Thank you for any thoughts!!

 

oldmannickels

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Re: $$ Into NYC Home Partnership or Stay With Vanguard?
« Reply #1 on: August 09, 2018, 07:42:45 AM »
For FIRE you'd probably have to sell your stake. Is that something you are willing to do.

Right now it's $167,000 and $1,400 cash flow. For another $120k you could buy something like another $1k in cash flow. That doesn't get me super excited, especially with real estate that I'm would be a minority owner in.

K-ice

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Re: $$ Into NYC Home Partnership or Stay With Vanguard?
« Reply #2 on: August 11, 2018, 09:16:20 AM »
My big question (red flag) is why is there a HELOC and where did that money go?
 
What are the other expenses on the building?

If the net cash flow is only $7000 on a $2M building I am very concerned where the money is going.

A good, but not exceptional, year in the market with balanced ETF could bring you $7000 on a $100,000 investment.  7%


waltworks

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Re: $$ Into NYC Home Partnership or Stay With Vanguard?
« Reply #3 on: August 11, 2018, 01:03:47 PM »
$7k in cashflow on a $2million building is almost unbelievably crappy.

TBH, I'd be worried about actually being able to liquidate your "share" in this place if and when you want to move. I'd stay the hell away from putting more money in!

-W