Concern: After inheriting a fully-owned $1M rental in NYC, I notice the net cashflow is very low. Does using mortgage leverage further worsen returns, or is this a common issue in real estate?
In my personal experience with NYC real estate, I have found that low cashflow is not uncommon due to high operating costs, taxes, and maintenance fees that significantly eat into the rental income. While mortgage leverage can sometimes enhance returns under the right market conditions, in areas like NYC the additional debt service often magnifies the strain on cashflow. It is essential to consider all expenses. A thorough analysis of risks and returns should be undertaken to identify if this scenario is a temporary anomaly or an inherent challenge of the local market dynamics.