New Investor to NJ area

[Dalton O'Rourke]

Hello,

Im looking to take the leap and start investing using the BRRRR strategy here in Central, New Jersey.

I have read multiple BP books and feel like I have a good amount of knowledge. While i have lots and lots of motivation to get started, I also have waves of intimidation. I believe im getting stuck in “ Analysis paralysis”. Im looking for that perfect deal, as well as a deal where i will not get in over my head. Im worried of not knowing enough and feel the need to keep waiting and reading more.

Any advice for taking that first step and starting out?

Thank you!

[Natalie Schanne]

@Christopher Scaffa @Dalton O'Rourke - I'm in the Princeton NJ area. First things first - if you are renting, the BEST and highest ROI way to get started is to house hack. Buy a 2-4 unit or a 4-6 bedroom, rent the spare units, benefit from your awesome 2.75% 30 year fixed loan, and buy a new one every 1-2 years. If you stay at least two years and want to sell, you can capitalize on up to 250k of free capital gains (reference: live in flip). While you are holding a 5-6 bedroom or a 4 unit, your personal rent should be close to free if not getting positive cash flow. I was paid 6000/year ($2000 rent - 1500 mortgage) plus 7200/year (13200/60000=22% ROI) of not paying someone else rent each year for living in my own 5 bedroom home. I had $60k down (20%). Plus the house appreciated 10%+/year (do not expect appreciation above 1-3%). I also wrote off my common area furniture and home repairs against the rental income.

If you go the straight investment property route with 20-25% down and with 5% loan, like @Peter T. said, you are much more likely to see about a 6% return. With depreciation, you will cash flow a bit let’s say $100-300/month not including cash held in capex reserves, and probably show a annual loss on your taxes. A lot of central Jersey has $300-400k homes with expensive taxes $7-10k renting for $2500-3000/mo. These are not great investment properties. I’ve been buying in Ewing around TCNJ where you can get a 5/2 student rental for $200-225k, $6k taxes, rent it for 2750/mo (550/bed) and profit about $1000/mo (12k/year). These houses are a lot cheaper than the Rutgers / New Brunswick houses (which may cost 400-600k and rent for $600-800/bed). However, I think the Rutgers houses likely appreciate more as they are closer to good jobs and NYC. Peter does property management in that area if you want to look into it, but you do have to expect he keeps the best deals for his own portfolio (as I or any savvy investor would.) My best deal in Ewing I’m all in for about 250k cash and it rents for $5150/mo. You can find a great deal like this too.