BRRRR in New Jersey

[Armand Munoz]

Newbie investor from NJ here. I have been educating myself day and night with everything real estate related. I am very interested in using the BRRRR strategy. I have a duplex with around $80k in equity, a decent savings of a little more than that, and access to private money.

Any tips and advice before I dive into it? Here is what I know in a nutshell. Pick a market to invest in. I find a property priced well below market value and when I refinance, the bank will usually only refinance 75 percent of the value (perfect because I will pull all of the money I put into the property out when I refinance). Meaning, I need to analyze the deal in order to hit that goal. So it is wise to stick to the 70 percent rule. I know the rehab part consists of getting a quality contractor, deciding what will add more value, the need to make the property a functional place to live in while not overspending, and brace myself for unexpected issues. I will screen tenants to get quality ones to rent because banks want to see it occupied before a refinance. Lastly, I will ask the bank if they offer cash out and what seasoning period they require. I can then use the cash out refinance from this property to fund the acquisition and rehab of my next.

If anyone has successfully done a BRRRR in New Jersey, I would love if you please shared your story with me.

-Armand

[Gaspare U.]

I have no experience in this but in an attempt to stir the "pot" I will toss in what I have seen.

Unless you are in "bad" areas I do not see many homes in NJ going for a big discount. Let's say you are looking for a home in a middle class area that offers good schools, transportation to the city and low crime. If that home is less than 90 min away to a major city via transportation, with a school rating of 7+ and you feel safe going to the local store at 11PM for a jug of milk there is a huge premium.

You are competing with people who will pay more for that quality of life. You and I are looking at it strictly as an investment and a numbers game. The competition is looking at this as a place to live and raise a family. They will pay a premium for this because emotions take a role. 

The other barrier to entry is the contractor. If I was to hire a contractor to do some major work in a 2 family in a nice area the cost would probably kill the deal. They normally charge a premium. If the avg remodel in that area spends $35k for a kitchen remodel and he's making $7-10k, how would he price your $12k Kitchen remodel? 

In NJ i think you need to look west or south, away from Manhattan and where public transportation is not a key factor. The only opportunities I see close to the city are flips. And again, you have plenty of competition from builders.

Polite feedback is very much welcomed. I would love for someone to shed some light on this where it could be effective. Nothing would make me happier than a BRRRR so close to home.