Hi everyone! I am Justine and I am the Founder of Live With Plum, the homebuying guide for the modern women. I started Live With Plum after going through my own real estate journey and seeing how little resources there were for homebuyers, especially first-time home owners. Also, as a single millennial woman of color, there weren’t many wealth buildingx stories that looked like mine even though we are a substantial and growing segment of homeowners in America. In this article, I will discuss my own home buying journey of how I looked at real estate as part of my overall investment strategy.
First unit – start small and learn the process
The first apartment I bought was at 25, right after I graduated from business school and was eager to lay down some roots after moving around too much previously. I had a short timeline (since I was uncomfortably couch surfing with friends) and a small budget since I have never bought a home and was slightly risk averse. After weeks of exhaustive searching, I found a tiny 300 sqft studio in Gramercy and made a full price offer.
My thought process for this purchase was more like a primary resident though I also took note of the investment opportunity. Over the years, I’ve come to see how most people, when prioritizing the criteria of their search, purchase only with an eye to live but don’t fully consider the investment side of it. I chose my unit because I wanted to live in it and also could see the rental value. I was also particular about the sublet policies since this was an apartment building, which means it typically has a handbook for owners to follow. In NYC, many apartments are cooperatives with strict rules towards subletting so it was a rare find to find one that allowed unlimited sublets after 2 years of primary residence.
My lesson learned from this first purchase was to understand the target market for the unit, in term of who you will rent to and who you will sell to. The reason why the apartment was cheap (in NYC terms) is because the unit was barely bigger than a walk-in closet but I knew that if I wanted to live there, then someone else of my similar background would also want to live there and it would not be a problem when selling or renting. I eventually rented it out then sold it for a comfortable profit, both times to other single women seeking starter apartments, proving my hypothesis right.
Second unit – location is half the battle
I repeated many aspects of my first purchase for the second one, including making a modest purchase (by NYC standards) of a studio and again in a coop building with a liberal sublet policy. The biggest difference was that this time I decided to purchase in an upcoming neighborhood instead of an already established one. Specifically, I purchased my unit in Hudson Yards which is one of the largest private real estate development in the United States by area. Though I had to live with the downsides of constant construction, I knew that was the hallmark of an area that will appreciate rapidly.
With this purchase, I learned how to identify up and coming neighborhoods to invest in for the longer term. One way of doing this is understanding and investing where the commercial money is going. These development plans are made many years in advance and are public knowledge. For example, construction for Hudson Yards started in 2012, four years before I purchased my apartment, which still benefited from the appreciation.
Especially if investing out of state, you can also identify demographic trends of a city by looking at census data, where trends like millennials leaving urban cities will emerge.
Third unit – keep doing what works
Following on with my investment strategy of identifying up and coming neighborhoods, I decided to search for a property in Jersey City which has lower dollar per square foot than NYC but still relatively easy access via the Path train. My hypothesis was that over time, more people would seek cheaper pricing than NYC but still want access to it, thereby choosing to live in Jersey City and the gap in price per square foot would reduce.
This was the first time I purchased in a different state, which meant that I had to file taxes separately. While not a big deal in the long run, in hindsight, if you are not a full-time investor, it probably makes sense to keep everything as streamlined as possible.
Fourth unit – taking on bigger risks
After completing 3 successful transactions, I was ready to take on more risks and purchased my largest property in 2019, which was a 3-bedroom apartment in the South Bronx. Area-wise, I kept with the hypothesis of rising neighborhoods but kept diversifying on the actual neighborhood.
While I chose to live in this apartment, I decided to rent out 2 of the 3 bedrooms to creation additional sources of income. At the end, the rent (market rate) from my 2 tenants covered the mortgage and homeowner association fees for the apartment, so I ended up living for free through something commonly known as house hacking.
I probably will not continue having roommates in the longer term as I get older and want more privacy, but this is a good way of living within your means in an high cost of living city.
Reflecting back on my journey, I am proud of the work I put in and absolutely believe that a successful investor is the product of experience and the willingness to test. My biggest learnings and advice are:
- Start small and start early: if you are more risk averse at the start like I was, then start small but most importantly just start
- Keep doing what works: once you identify something that works for you, keep at it!
- Take risks along the way: though I advocate to start small, once you have more experience, this allows you to take more risks
- Enjoy the process: it will be a lot of work but remember to have fun along the way