Brand new to house flipping

[Phil Kogan]

Hello everyone. Brand new user here from Brooklyn, Ny. I am also very new to real estate. After doing a gut renovation on my home with a GC a few months ago, I found myself drawn to the process of the renovations. I am now planning to buy and flip a house in the Essex NJ area. Honestly, I am not sure if I am looking in this area because the deals are right or because the prices seem low and attractive to a beginner. As many other newbies attempting to flip a house, I have a ton of questions like where to buy, how to figure ARV, where and what to look for, and how to start. Any pointers or suggestions would be helpful. Thank you.

[Tim Pagano]

Phil as an Essex County resident for over 25 years let me share with you what I know about this place.  Some of the wealthiest people in the nation and some of the poorest reside here.  It's so culturally diverse and rich community.  There are deals but don't be fooled by "low" prices.  You and I both know that NYC is flooded with foreign capital driving the RE prices through the roof, and consequently the surrounding communities are seeing an explosion in housing prices as rents force people from their neighborhoods.   

There are thousands of investors here in Essex County looking for deals right now. They understand the market and are tough competitors. You don't mention what kind of property you're looking for or what your investment goals are. You can be a slum lord or you can flip multi-million dollar houses here in Essex County. I know one area where you can do both within a 1 mile radius of each other.  Check out the Bamberger Mansion it's on the market. My point is you must define your goals much better before you anyone can respond to your post for information. 

I live 30 minutes by train from Madison Square Garden.  An investor purchased a house just down the block 2 years ago for the high $200's and sold it for just over $700k.  (Oh and BTW I'm still mad I missed that deal.)  My neighbors were astounded by this, but I understood why.  It took the investor nearly 6 months to get the town to approve his changes.  He turned a 2 bedroom house with no parking into a 3 bedroom house with off street parking.  It took nearly a year to work through the bureaucracy and finish the project and he sold it to a person from Brooklyn.  He was rewarded for his tenacity and creativity. This example is the most freakish I've seen so far.  FYI I bought a similar house down the block for $189.  

You can find deals in Essex County but understand that your sellers can see you coming from a long way off.  We know what's happening in NYC and we are prepared.  With that said pick your neighborhoods carefully and understand that just because it's cheaper than Brooklyn it doesn't mean it's a good deal.  Another word of caution, good contractors are really hard to find and your NYC contractor probably won't want to travel to NJ.  Also town building inspectors here are a source of revenue, and if you get caught doing work without permits it will cost you.  In Montclair NJ I've heard of penalties running into the 10's of thousands of dollars.  The contractors I work with are very cautious about being penalized. The good ones won't do work without permits. I'm not saying off permit jobs aren't being done.  I'm just saying if you get caught you're going pay fines and be delayed.  

Here's my last bit.  Doing one gut renovation is an achievement.  I know I've done many and there is a great satisfaction in it.  But RE investing is more about knowing and understanding a market and being able to discern the metrics of a deal.  Investors like safe deals with high returns, if you can bring those to the table the money will flow.   A good deal is a good deal in any market even though the price points could seriously differ.  You can succeed in Brooklyn just as easily as anywhere else.  I welcome you to Essex County, but you might want to dig into the resources here at BP, learn all you can, and clearly define your goals before you start investing in NJ.  PM me if you have Q's.