New to Real Estate · Bergen County, NJ · Member since 2020 · 7 posts · 3 votes
I'm a new investor. Like so many others, I've read loads of books (Including Bigger Pockets, of course), read tons of blogs and listened to heaps of podcasts. The final hurdle has been accomplished: My wife is now on board!
I've got lofty goals, but need help with the first step. I'd like to start with either a SF or 2-4 unit MF property and am confident I could secure financing.
That said, I live in a very expensive part of the country (Bergen County, NJ) where home prices and rents don't align well, so my first deal will need to be out of state. I'm comfortable with this and am open to all parts of the country. I'd love to hear where in the country people are seeing success now.
I'm looking forward to being a part of this community and sharing (once I have what to share).
Northern NJ · Member since 2017 · 69 posts · 45 votes
5y
Hi @David Spangenthal, I would challenge your statement "my first deal will need to be out of state". I live in Hudson County, but the same idea applies to all of northern NJ / the NYC suburbs.
Let's say you find a house the MFR out of stat that you are looking for and it's $120,000. Since it's an investment property, you'll need to put down at least 25%, and I'm not sure if that will be higher since it's a MFR. 25% of $120,000 is $30,000. If you were to buy a MFR here in north Jersey, as an owner occupant, you could put down 5% or even 3.5%. That $30,000 as a 5% down payment would buy a $600,000 house.
There are benefits to this more expensive house in NJ. Any appreciation is on a property worth 5x as much. For each mortgage payment, the principal paydown is much larger as well. It's hard to quantify exactly with interest rates on the two loans (and you generally get a lower interest rate as an owner occupant), but it could be $700 per month right from the get go.
I was in a similar situation as you. Two years ago I thought I had to go out of state and had a transaction on a SFR fall through at the last second. I'm so glad it did, because I now have a duplex in Hudson County and I benefit from everything mentioned above.
Teaneck, NJ · Member since 2015 · 49 posts · 11 votes
5y
Hi David,
Welcome to equity appreciation tax advantageous world of real estate investing! Hurdle to entry in north Jersey is the high cost of entry. Have you considered house hacking a multiple family property. This will make you eligible for a 3.5% down payment FHA loan. Cheapest money you can borrow....
I'm a grizzled veteran landlord by now so if you want any input I'm glad to help run by a deal with you. I'm a licensed realtor with MLS access if you want to look over the market together. Good Luck, and hope you take the plunge soon!
Northern NJ · Member since 2017 · 69 posts · 45 votes
5y
Hi @David Spangenthal, I would challenge your statement "my first deal will need to be out of state". I live in Hudson County, but the same idea applies to all of northern NJ / the NYC suburbs.
Let's say you find a house the MFR out of stat that you are looking for and it's $120,000. Since it's an investment property, you'll need to put down at least 25%, and I'm not sure if that will be higher since it's a MFR. 25% of $120,000 is $30,000. If you were to buy a MFR here in north Jersey, as an owner occupant, you could put down 5% or even 3.5%. That $30,000 as a 5% down payment would buy a $600,000 house.
There are benefits to this more expensive house in NJ. Any appreciation is on a property worth 5x as much. For each mortgage payment, the principal paydown is much larger as well. It's hard to quantify exactly with interest rates on the two loans (and you generally get a lower interest rate as an owner occupant), but it could be $700 per month right from the get go.
I was in a similar situation as you. Two years ago I thought I had to go out of state and had a transaction on a SFR fall through at the last second. I'm so glad it did, because I now have a duplex in Hudson County and I benefit from everything mentioned above.
New to Real Estate · Bergen County, NJ · Member since 2020 · 7 posts · 3 votes
5y
@Boris Portnov - Thanks - I'd be happy to connect if there are properties in the surrounding area you'd think are interesting House hacking won't work as I already own a primary [permanent] residence, although in theory I love the model.
@Larry S.- Similar to my note to Boris, house hacking / owner-occupying a multi-family isn't a possibility right now
I'd love to be able to find a way to invest locally, I'm all ears if there are any other thoughts/suggestions
Real Estate Agent · Raleigh, NC · Member since 2020 · 16 posts · 19 votes
5y
@David Spangenthal If you're in Bergen County I'd recommend the Lehigh Valley and surrounding areas. As far as rentals go, price:rent ratios there are great and the best part is you can easily drive there. Parts of Bethlehem are great, Phoenixville is great, but a bit more expensive, Pottstown is kind of a middle ground that is starting to see some population overflow from Reading. Bottom line a lot of great areas within a few hours of you!
Realtor · NJ · Member since 2020 · 277 posts · 138 votes
5y
@David Spangenthal I'm from Bergen County born and raised as well, but I did a multifamily deal in Hudson County and continue looking for investments in NJ. It's certainly expensive, but that's not to say that it isn't possible to find deals and positive cash-flowing multifamily properties. Feel free to connect and we can chat more about some areas I think are good for investing in NJ.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
5y
@David Spangenthal assuming that cash flow is your primary goal, you can do very well in parts of the Midwest. I particularly like Indianapolis and Kansas City. We've been active in both markets with a lot of success for the last 10 years. There are a lot of good cash flow markets but if you're going to be in this for the long haul, you want to be in markets that have growing populations, growing jobs and diverse, modern economies and industries. That's where I think Indy and Kansas City shine above a lot of the other popular cash flow markets. I'd be happy to share more insight on both if you want to reach out.