Or Don't Do What I Did.
Things have been quiet on the site and social media lately because for the past 8 months my wife and I have been looking to buy a house in Brooklyn and it's a full time job. Well as of the end of December, we got a place and it is great...sort of. I will give you a blow by blow of what happened and what to avoid.
Our goal was to get a place that had at least two bedrooms and a good size basement. We had lived in Inwood, a small community above Washington Heights at the end of Manhattan. I had lived in the same apartment since 2003 and the rent was low but it was a small one bedroom and we were quickly running out of space. We had been looking for years to buy in that area but most places are Co-ops and require at least 20% down which took a while to save. A couple years ago while trying to save, we started to notice men getting off the subway with funny looking mustaches and beards. We looked and thought maybe he missed the L train stop at 14th by about an hour and then we realized "Oh Shit! The neighborhood is about to really change." For a long time Inwood had been a hidden secret. A great little area with lots of wonderful parks. It did not have much in the way of restaurants, (unless you like Dominican food or fast food) but that quickly changed. With Dyckman st. becoming a hotspot with Jay Z and Beyonce at La Marina and people looking for affordable rents (think 1200 for a one bedroom) we were quickly priced out of our beloved Inwood. We watched one bedroom Co-ops go from 300,000 to 600,000 in a couple of years.
While looking for other places to possibly move to, my wife suggested we take a look at Bedstuy. I knew it was close to Bushwick and that area has just exploded, so I agreed. On a Sunday morning we made a 3 hour train ride to the area. We just decided to walk around for a while to get a feel for the area. We walked up Malcolm X Blvd and as we passed people, everyone was very friendly and made it a point to say hello. Sorry, I am a jaded New Yorker and when someone says hello, they usually want something or are in the process of lifting your wallet. This was not the case, and contrary to the stereotypes, people had manners in Brooklyn.
We were walking down the street and most Real Estate offices were closed, but then we came upon a place that was called Reliable Real Estate. Again my jadedness struck and any place in NYC that has reliable in their name is usually not, but again Eni convinced to go in, she is not good at taking no for an answer. We talked to a young Hispanic guy at the desk and he directed us to one of the agents. I believe his name was Avi and asked us what we were looking for and how much could we afford. We told him $500,000 would be stretching it. He laughed at us and told us that this neighborhood was well beyond that price range. He asked how much we make and we told him. He then pulled out a chart and said well if you make this much you should be able to afford $800,000. We were shocked and I told him I don't have a rich uncle. He said with a FHA loan at 3.5% down you could afford a place like this. We had never heard of an FHA loan. Basically it is a federal loan for first time home owners that allow you to only put 3.5 - 5% down. Great where do I sign!!! Well of course their is a catch, it is NYC and their is always a catch. On top of your Mortgage you have to pay PMI which is Private Mortgage Insurance. For a $800,000 mortgage you will also have to pay about $1,500 a month for PMI. So a $4000 mortgage and $1,500 PMI and well its still a bit much. Then he told us that what most people do in these areas in buy a two family home and rent out the top floor for anywhere between $1500 and $2500. Ok that takes care of the PMI. The other thing he told us is that between 2-5 years most people refinance and get the PMI removed. You can do that when the estimate for the house goes up 20% or you have paid off 20% of the Mortgage. Plus he told us that you will get large tax returns at the end of the year that will help with the Mortgage. So basically we could have a house in Brooklyn and pay anywhere from $1500 to $2000 a month. Ok not bad and it definitely seems doable right? Right! Oh lord help us.
Next - Out of the Lions Den and into the Wolf Pack.