Realistic Real Estate Strategies in Northern NJ Market

[David Casas]

Hey everyone,

So I've been analyzing 1-2 deals per day, driving for dollars, attending RE Auctions, looking in to foreclosures, and looking for great Real Estate agents in my quest to find my first great deal in my area.

The problem I am having is that none of the deals that I have been researching tend to meet up to the (what I now see as) high expectations of 7% minimum Cash on cash ROI, $100-per-door monthly net profit/cashflow expectations that many of the big name BP users/founders swear by. This is leading me to weed out almost every deal I find in my area as a bad deal. It's leading me to believe that maybe those expectations are not realistic in our market in Northern NJ.

I started wanting to house-hack a 2-4 unit multi-family, and am now thinking that due to the low positive cashflow and even lower ROI that I've been coming across in my analyses, that house-flipping might be a better place to start to take advantage of hard-money lenders and make smaller profits on house flips until the market sinks back down to see better rental property profits.

I'm starting to think twice about all my numbers that I use as a basis of estimation. Is 9% vacancy estimate too high? $10k closing cost too high? $6k repairs minimum (For some light modernization and cleanup on the property once purchased) too high? Is everyone in my market investing for mostly property appreciation gain as opposed to cashflow or ROI? Is it common to "break even" in rent in this market, or are you just finding very good deals that allow you to have positive cashflow amidst the high property taxes and higher purchase prices?

Are my calculations wrong? Are my expectations too high? Am I getting too impatient or too unrealistic in my expectations? What can be considered a good deal in the Northern NJ market?

I'd love to hear other people in my market that have found a winning strategy to stay afloat and thrive in this pricey market. Any and all strategies, analysis assumptions, contract contingencies, and sheer local real estate knowledge on expected returns on projects are welcome.

Thanks again to this great community,

David

[Tania Patch]

I am pretty sure no one is going to agree with my way of doing things, but I go for break even. There are barely 3% cap rates in my area. I would rather have properties I can retire on then none at all because I was too conservative and unwilling to take risks. When I purchased my first property 15+ years ago it was break even and any repairs were out of pocket. It has since doubled in value, rents increased significantly and when its all paid off I will be making about $1500/mo on it. And this is just a small condo - not a multi-family.  I have more then recovered the expenses that were out of pocket in the beginning.  I understand looking for great cap rates, but in the long run you could lose out on solid properties that could be your retirement. Real estate isn't all fast cash.