MUST KNOWs Hacking Multifamily - 1st time investor in NY/NJ area

Question

Hi all - This community keeps on giving and I'm so grateful for you all! I've been reading a lot about multifamily investment (up to 4 units) during these past two weeks and I'm inspired to take it more seriously. I currently rent in NYC and I'd like to buy my first property where I can live (hopefully within 1 hour drive distance) and also generate rental cash flow. I've started to use the BP rental property calculator so I can be better at analyzing deals, but in the meantime I want to learn from the experts here so for those who focus on MFU, I've some questions:

1. Where do you find your deals?

2. What numbers do you need to truly evaluate whether to purchase or pass?

3. What are the things you wish you knew now when you started investing in MFU?

and last but not least, do you have any suggestions of people I can connect with or resources I can review while I'm in this research phase?

Truly grateful for your response and guidance!

Jonathan Greene · Answer

The calculators won't tell you much about NJ multi-family until you see them in person. Analyzing deals off-site is just exercise, it helps, but it doesn't actually give you much. Because of the high taxes in NJ and the crazy market, nothing you put into the spreadsheet will be accurate. Most people are taking a local list price, say 350k, and analyzing based on that, but that multi will sell for 425. The problem with pre-analysis is that you don't know what the numbers mean in each market and each town. 300k can look very different in Newark than in Belleville. The sites are very limited on data so you can't really do ARV calculations without MLS access  because you will be missing so much of the market.

Erickson Sainval · Answer

1. I use brokers, agents, trulia, BP, realtor, redfin, loopnet, and just driving around your neighborhood

2. at least 8% or more cash on cash, and  internal rate of return

3. Proper tenant screening will make or break you. A good handy person will save you hundreds.

4. BP is probably one of the biggest hubs to connect. Other resources are books, seminars, webinars, and meetups. Find them, join them, learn, and grow.

Lemarr Chambers · Answer

@Redi Yib it’s my first property. The market I can’t really say if it’s good or bad i had to sell the property I was in so I purchased due to that fact. I considered the deal to be good I will cash flow a $1000 a month after all expense

Charles Xia · Answer

@Lemarr Chambers I don't think that is how the rule works... Just to be clear lenders will consider a home an investment property if you are buying another house within 50 miles of your primary residence. There is no rule that says you can't buy within 50 miles of your primary residence. And obviously you can't really have 2 primary residences because thats not how primary residences are defined. You can always get a secondary residence in another state or further than 50 miles. However you should always check with your lender on these rules.

@Redi Yib Welcome to Bigger Pockets and congrats on starting your Real Estate Journey. To answer some of your questions on how I first started out. You should first get a good feel of the mortgage numbers and what will and will not cash flow. Here are my first responses to newcomers:

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First, work out the numbers.Let me point you to a mortgage calculator to start.https://www.google.com/search?q=mortgage+calculator&oq=mortgage+&aqs=chrome.0.35i39j69i57j46j0l4j69i61.1156j0j7&sourceid=chrome&ie=UTF-8

If you find a home for $500k, you put 20% down ($100k) for a mortgage of $400k. Assume your mortgage interest rate is 4% for a 30 year fixed which is a little higher than the standard rate currently (its safer to assume a higher rate) The monthly mortgage payment is about $1910 just for the mortgage. This excludes property taxes. Property taxes in NYC is about 1% of the property value for the year. so 1% of $500k is about $5k. To add it to the monthly mortgage payment ($5000/12 = $416.67) Totaling a monthly payment $2326.67. This assumes you find a 2 family house for $500k which is highly unlikedly in corona. I start at $500k because its easier to scale. If you saw a $1M house you can double the monthly payment to estimate $4653.34.I would say to start figure out what your budget is and what you and your husband can afford. Find a good real estate agent that knows how to work with investors and familiar with the numbers and rent roll for the property to cash flow.

And always, dont rush. Take your time to understand the market. No deal is better than a bad deal!

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Once you start analyzing a lot of deals you'll get a very good feeling on what the monthly payment is going to be based on the purchase price. This is a great place to start.

After that you can start looking for things within those price points and zone it down by neighborhoods. Neighborhoods and states differ a lot in taxes which is another major cost that will impact your monthly payment. You can search for the property taxes on specific property which takes a little bit of work. If you work with an agent the MLS listing will have the property tax information too.

After knowing your monthly payment you can guess what your monthly rent could potentially be depending on the number of units and that will help you scan for properties really quickly.

I hope this helps,

Happy Investing,

Charles

Redi Yib · Answer

@Lemarr Chambers That's very interesting but not surprising bc it's NYC. Thank you for sharing that! Is that your second property? How's the market in Queens? If you don't mind sharing what worked for you to make the offer? Thank you!

Lemarr Chambers · Answer

@Redi Yib keep in mind NYC has a 50 mile radius that you can not buy a second property within 50 miles of each other. I just purchased a multi family in Queens and my lender told me about the rule..

Good luck

Redi Yib · Answer

@Jonathan Greene that’s a good point. I’m hoping to catch the call tonight. I missed the last one bc of conflict on my schedule. Thank you again for organizing it!

Jonathan Greene · Answer

@Redi Yib if you are going to house hack, you have to prioritize your comfort with the area and commute as much, if not more, than the actual investment angle. Too many new investors are looking for only the best metrics and end up house hacking in an area they don't enjoy living and a house or unit that they don't even like. Yes, driving the areas is a great strategy on weekends. We talk about that a lot on our calls.

Redi Yib · Answer

@Jonathan Greene Thank you for this insight, very helpful! I’m glad I’ve subscribed to your list to get started and I’ll keep the MLS point you raised in mind as well. The other thing I’m struggling with is how to narrow my search area by zip code or city. Ideally, an hour drive away from the city would be great but there are different markets as you pointed out. The choice depends on my budget and criteria at the end but do you have any tips on how best to navigate this phase of research? I think driving by and actually going to selected places will help, but I’m sure there are more considerations that savvy investors such as yourself keep in mind.

Redi Yib · Answer

Thank you, Erickson! Do you've states or markets that you typically focus on outside VA Or do you invest where you live?

MUST KNOWs Hacking Multifamily - 1st time investor in NY/NJ area

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