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Ask Curbed: Are Small-Time Landlords Poor?

We can't say we've ever harbored any desire to buy a small rental building and lord over it like the just emperors we know we can be, but then again, we were never into Model UN in high school either. It's all pretty much the same?play a little politics, calculate a little gross national product, etc. So for those out there who represented the great land of Burkina Faso, a situation for you:

I have a sincere question I'm hoping you will pose to your readers and allow them to comment on. I think it's quite relevant to some of the more active "debates" on the comments recently.

The issue: I can't figure out how a small-time landlord could possibly make any profit.

I have repeatedly looked at the prospect of buying a small multi-unit building, renovating it (if necessary) and renting out the units as an investment. However, every time I "crunch the numbers" it seems impossible to me that an owner could actually make ANY profit from such an investment, let alone enough to justify the troubles and liabilities of being a landlord. What am I missing? Here's an example. This is a listing for a 9-unit townhouse in the Upper West Side listing for $4.5M: Suppose you buy this at $4.25M, put 10% down, so your mortgage is $3,825,000. At 6.5% interest, that's $248,625 in interest expense per year (plus lost opportunity of $21,000/year in guaranteed 5% money market interest on the downpayment.)

Taxes are specified as $23,000 per month, which is $276,000 per year. So right away, you need to recover $545,625 not including insurance, repairs, management fees, utilities, lawyers, closing costs, etc.

It says there are 9 units but only 8 bathrooms, and a total of 10 bedrooms. I read that to mean there are 8 rentable units, two of which are 2-bedrooms and the rest are 1 bedrooms. Forget whether some are really just studios, and let's assume all apartments are market rate and demand is (of course) high.

In this area (West 84th) 2BRs can be rented for about $4500. The 1BRs probably will rent for $3000 if they are decent. The monthly rent roll is therefore $27,000 and the annual rent gross revenue is $324,000. That's nowhere NEAR what you need to pay the mortgage and taxes ($545,625), setting aside ALL other expenses. How can anyone make money doing this?

OK, now that Ardor Realty is out a sale, please add your informed opinion to the comments.
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