Is Brrring multifamily a good tactic and is New Jersey too expensive for $250,000?

Question

My name is Aidan Herrera (22 years old) and I live near Hackettstown NJ, I recently went through less than 1 month ago a pain no one should ever experience with the passing of my best friend and father. He was a wonderful man and through his hard work and amazing character left our family with just over $500,000 and my mother lovingly lended me and my older brother $250,000 to split. I have been listening to the podcast for just about 5 months and want nothing more than to put this money to good use, and to help support my mom. she's recently retired and struggling to pay for health insurance and doesn't want to feel like a burden because she will need help with her mortgage. I know this is a broad question but me and my brother have agreed to use this money purely for investing and to help us in our goal with financial freedom and to set our mother up for success. I wanted to take advantage of forcing appreciation and refinancing to try and recycle my capital for as long as it will let me. Is there any sites or resources available to find off market or dilapidated multifamily. Can BRRRRing be used in multifamily deals and if so can a budget of $250,000 be enough to get into multifamily in cash? Also is New Jersey too expensive to get started?

Shawn Mcenteer · Answer

Hi @Aidan Herrera my wife and I BRRR'd multi families in NJ many times,  the most we ever put into one property was about 100k.  You having $250k is a significant amount of money to leverage.  A lot will also depend on lending and where you stand with that but in terms of liquid cash you for sure have enough to do some damage.

Vanessa Ivonne Hernandez · Answer

I hope you can find peace in your heart sooner rather than later.

Yes NJ is expensive but it's possible. For example, you can buy a property via FHA with 0% down on a multifamily (YES this is possible for anyone reading this. I have a pre-approved buyer doing this now) and leverage the rest of your money to force appreciation through renovations.

I usually tell people to start building your team by interviewing lenders and realtors to get started. The right realtor can help you find properties and open you up to other markets you may have missed. The right lender can structure your loan properly and match you to the right product to help you scale your portfolio.

I have interview questions I use to vet realtors and lenders (like myself) that I can send you. Message me if you want help.

Account Closed · Answer

Sorry for your loss Aidan. New Jersey can be expensive, but $250,000 is no small sum. BRRRR is ideal for MF if the rehab is financially feasible. Make sure to be liberal and overcalculate the rehab expenses- you never know what issues may arise. You could also consider out of state investing in a strong cashflowing region like the midwest, but be sure to calculate potential costs of property management.

Joseph Guzzardi Jr · Answer

@Aidan Herrera Hey Aidan sorry for your loss. I believe your best bet is to get educated and partner with people so you can learn exactly what it is you want to invest in, how to invest in it, and why you want to invest in it. The best way to learn is by doing and having someone with experience, positive outcomes guide you. This will accelerate your learning curve & reduce your expenses. You can meet experienced people like this at meetup events or one on ones with people in the industry here. Happy to guide you on your journey. I am a fellow multi fam investor in NJ myself.

Michelle Bateman · Answer

I am very sorry for your loss. I would recommend looking at different markets to invest in, even out of state, as long as you get connected with an investor friendly real estate agent that has the right team in place and can provide resources and guidance, your money will go farther in a different market. Please reach out if you want more information, I am an investor friendly real estate agent in the Kansas City area and can offer great insight into this area. I also have a great network of investor friendly real estate agents across the nation. Happy to help in whatever capacity  needed.

Jimmy Lieu · Answer

Hi Aidan, so sorry to hear about your loss. I would take a look at cheaper real estate markets that have much better opportunity cost for your capital. I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. With many of these deals here in Columbus, you can BRRRR and get most of your capital back and rinse and repeat to keep buying here. Just a few weeks ago, I helped a client close on a deal getting them 20% cash on cash return. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!

Danielle Hayes-Ward · Answer

Hi Aidan,

I'm in Newark, NJ and have a General Contracting business. NJ is one of the more expensive states when it comes to investing however it can be done and there are still some good deals. It may take some time finding the right one. I also own property in Cleveland, Ohio which is much cheaper and was my first "all cash" investment property. A word of caution when investing out of state as a first time investor, due your due diligence with everyone you do business with....realtors, property management companies, contractors and anyone you JV (joint venture) with. That is crucial. Have a minimum of 2 for each profession you need just in case things go wrong! Network and build relationships. In NJ repairs will be your biggest expense for a $250K house which will need repairs. Many properties even in the low-income areas are starting at $300K+ for multi-families. Put as little of your own money down to keep a reserve, and know your numbers or learn how to calculate what makes a good deal. Best of luck to you! :)

Aidan Herrera · Answer

Thank you for responding, and yes i am willing to look at other states to get started. That was one of my questions as well, if it was smarter to put 20% down on multiple properties  or go all in cash in one property in hopes to get a better deal and "buy equity" raise its ARV and then refinance to solidify my chances to regain my initial investment. I am all in with this and want to do whatever it takes to get the ball rolling. I like the idea of entering cheaper markets and flipping and renting in hopes to getting back my capital. I would need to contact Agents in markets like those and wrap my head around those areas and hopefully buy properties that are in appreciating areas. I'm unfamiliar with the Midwest and what it has to offer. Thank you again any information is appreciated.

Jason Wray · Answer

Aidan,

First I am sorry for your loss but sounds like he had a great family and two smart sons.  My advice would be put that money in the bank and only use a small amount for a down payment.  NJ is an expensive state but you can find good investments.  If you are open to becoming a real estate investor and open to a wider geographic.  I would strongly suggest putting that money into a few other states where you can get a bigger bang for you buck.  Also less annual taxes and similar to greater cash flows with less of a hassle.

I would use Indiana as an example you can still pick up a 2-4 Unit Multifamily anywhere from $95K to $300K.  Which means you only need to put 15% down again saving your large lump of cash letting it earn you interest.  Being cash fluid also allows you to pull the trigger on other down payments if an opportunity presents itself.  It also allows you to be prepared for the "What if Factor" if something happens that needs to be repaired or an issue pops-up.

Annual taxes in NJ range form $8-$10,000.00 a year.  In Indiana your looking at $1000-$4000.00 based on that price range above.  You also have spots in Tennessee where annual taxes are $400 a year outside of Knoxville.  Where you can buy a 3-4 Bedroom home on 3-5 acres for under $280K using it for long term or short term rentals.  So biggest take away is do not spend more than you need to buy a rental, again only 15% down.

Although you live in NJ there are a lot of great property management companies and individuals in both states.  So up-keep and maintenance can be simple and cost efficient by hiring the right person/team.  You can also focus on "ugly inventory" meaning homes that need repairs or renovations since you have the cash to use to increase the future ARV.  Then you refinance in as little as 6 month to recoup your initial capital.

Is Brrring multifamily a good tactic and is New Jersey too expensive for $250,000?

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