Where to find multi-family units and gotchas with multi family investing in Jersey

Question

Hi Fellow investors,

I have been using BP to gain insights in real estate investing and have been applying them in my townhome rental units. This time i want to enter into multi-family investing and looking for some tips. Any direction from current multi family home landlords are appreciated.

Looking to put down up to $100K in down payment. 3-4 unit homes are my target

1. Where to find multi-family units in South and/or Central Jersey?

2. What are some decent areas with low property tax and high occupancy rate?

3.Zillow doesn't bring me any units, my realtor also doesn't have knowledge on multi family units, what are my other resources you would recommend?

4. Would  you recommend equity line of credit? or 401K loan?

5. Any tips in multi family home investing?

6. How do you calculate the Returns in a multi-family unit?

7. Are utilities paid by individual unit tenants?

Thanks

Ram

Nadiyah M. · Answer

There's a high multifamily inventory in Essex, Passaic, and Hudson counties.

Gina Stern · Answer

You should go to your local REIA, there are like-minded people at these events that can always give you tips and insight too. Check out online foreclosure auctions in your state too, it is a great place to check out any deals. Good luck!

Tanarat Bunchom · Answer

• 1. Check platforms like LoopNet, Realtor.com, Crexi, and BiggerPockets Marketplace. Network with local investors or wholesalers for off-market deals.
• 2. Look into parts of Burlington, Camden, or Mercer Counties. These areas often balance occupancy rates with reasonable property taxes.
• 3. Explore county auction websites, local investor meetups, and property management companies for leads on multi-family opportunities.
• 4. A HELOC can be flexible, but ensure you have solid cash flow to cover repayments. 401K loans carry risks like penalties if not repaid on time.
• 5. Always verify numbers: check expenses, occupancy rates, and market rents. Focus on properties that cash flow after all expenses.
• 6. Use the cash-on-cash return formula: (Net Annual Income ÷ Total Cash Invested) × 100. This helps assess profitability.
• 7. This depends on the property’s setup. Properties with separate meters often have tenants pay; otherwise, it’s typically landlord-paid.

1. Check platforms like LoopNet, Realtor.com, Crexi, and BiggerPockets Marketplace. Network with local investors or wholesalers for off-market deals.

2. Look into parts of Burlington, Camden, or Mercer Counties. These areas often balance occupancy rates with reasonable property taxes.

3. Explore county auction websites, local investor meetups, and property management companies for leads on multi-family opportunities.

4. A HELOC can be flexible, but ensure you have solid cash flow to cover repayments. 401K loans carry risks like penalties if not repaid on time.

5. Always verify numbers: check expenses, occupancy rates, and market rents. Focus on properties that cash flow after all expenses.

6. Use the cash-on-cash return formula: (Net Annual Income ÷ Total Cash Invested) × 100. This helps assess profitability.

7. This depends on the property’s setup. Properties with separate meters often have tenants pay; otherwise, it’s typically landlord-paid.

Shawn Mcenteer · Answer

Hi @Suresh Ram I do most of my business in central- North Jersey.

1. connect with someone who specializes in multi family investing.  The deals I bring from clients are combination of off market and on market but most of the deal I bring happen becuase I am well know in the multi family community.  Find local specialist in your area is huge.

2. close to public transportation. Train is huge!

3.zillow is used for browsing but notorious for being inaccurate with multifamily

4. tough to say without know more.  yes the work, is it smart move not sure.  Ive done it myself leveraging 401k and HELOC

5.Yes lots! not sure where to start :)

6.BP calculator works great, just need to tweak a few things when using is

7. BP calculator does it, its an estimate but works

8.  depends on property but most of the time yes

Ryan Muska · Answer

Hey Ram,

Great questions and let me do my best to provide insight as I do lots of business in NJ:

1. Where to find multi-family units in South and/or Central Jersey?

Scour every home site available and even sites that are not know for home sales, but sales in general - you may be surprised. If searching on your own is not sufficient, try making a connection with a new real estate team - there are bound to be real estate teams specializing in investor-focused purchases

2. What are some decent areas with low property tax and high occupancy rate?

This is the golden question that your own due diligence will have to answer - not sure any investor is going to give away exactly where they are investing as this would cause more competition haha.

3.Zillow doesn't bring me any units, my realtor also doesn't have knowledge on multi family units, what are my other resources you would recommend?

Zillow is not the only place you can see homes for sale, get creative and think outside the box. There are a plethora of websites where homes can be listed - not just the ones dedicated to home sales, too.

4. Would  you recommend equity line of credit? or 401K loan?

Taking a loan against your 401k/equity in your home is a good idea, but needs to be utilized correctly. If you plan on purchasing your new property with a loan based on DTI, then it may be harder to qualify if you are leveraging yourself some more. That being said, if you are doing a non-income based loan, then you wouldn't have an issue qualifying still. But it's a tricky path and you need to make sure you are doing it in a smart way.

5. Any tips in multi family home investing?

Stay away from electric heating - this is a tip for all investing to be honest.

6. How do you calculate the Returns in a multi-family unit?

Same way you would calculate it in normal investing - once the property is 5+ units, it gets a little more nuanced. But for 2-4 unit investing, calculate it the same way you would for a typical residential property.

7. Are utilities paid by individual unit tenants?

I'm a fan of always making tenants pay utilities. You may need to lower the rent you are asking for by a bit, but it is way better to have a tenant using less water because they're the ones paying for it, than having them run the water for hours since they aren't the ones paying for it. This is also why I dislike Electric Heating. Electric heating compared to gas heating is much more expensive, so if the tenant is going to use it, definitely have them pay for it. But if they use it to excess, then the electric bill will be much higher than anticipated and if that month of high electric comes during a time that the tenant is facing hard times, they are more inclined to pay for their heating than their rent. Things to think about.

I hope all that made sense! Feel free to message me if you have any questions!

Robert Rixer · Answer

I can't help you with Jersey specific questions. But 3) Try multifamily specific brokers, crexi and loopnet, although 2-4 units maybe scarce.

4) A home equity line of credit is a good source of funds however it will generally make your overall monthly payments higher, so unless a deal is very solidly cashflowing, a HELOC may put you into negative cashflow.

7) Typically electric/gas are paid by the tenant - however this isn't true across the board. These are some of the questions you have to ask on a case-by-case basis.

Suresh Ram · Answer

Thanks for the detailed response, much appreciated @Ryan Muska

Where to find multi-family units and gotchas with multi family investing in Jersey

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