Rookie investor exploring a multi family in jersey city heights

[Joseph Chacko vellukunnel]

Hi BP,

I am exploring a Multi Family (2Family) investment in jersey city heights (close to christ hospital).  The strategy is to buy and hold with positive cashflow.  I have some prior experience house hacking my condo in union city, but outside of that I am generally new to real estate investing. This definitely feels like a step up and I wanted to ask a few questions as I try and navigate this opportunity. 

1. Renovations and Repairs- The property is  a ~100yr old brick  building and will require some work before its rent ready.  I also noticed a few cracks around the building exterior and uneven floor in the basement.  I'm getting a contractor/ structural engineer to come by and help me draw estimates and understand how serious these issues are. My agent is still not able to get the seller disclosure, but hopefully that has some clues as well.

•  As a rookie, what are works that Is should stay away from?
•  since the building is old.  I am thinking I'll have to set aside expenses to redo the wiring, plumbing, etc and bring them upto code.  Typically how  much extra should I budget for, for these unknowns?
•  I am thinking of doing some remodelling inside, moving around a few walls, opening up the kitchen.  What permits would I need from the city?  How long would this process take.
•  Given Covid related material and supply shortages, should I plan additional buffer time around my contractor's estimates.  Trying to understand how long the property will remain vacant after purchase.

2. Financing - since the upfront repair work might require additional cash out of hand,  what are some creative financing ideas. I was hoping to get the property refinanced at a higher valuation after repairs and pay out any bridge loans that I had procured in the interim.   Let me know if thats not a good strategy for the area.  Also let me know if you have recommendations for local banks that I can work with.

3. Tenants and growth potential-  Any thoughts on "the heights" and whether the area still has room for appreciation?  Also, wanted to ask if anyone has experience renting in this area.  Is the tenant quality good?  Do they typically stay long term?

4. Team/ Networking -  I'll need all the help I can get with this property.  Contractors, brick masonry experts, structural engineers, home inspectors, lenders.  Any suggestions for local experts in jersey city?  Would also love to connect if you're also an investor in the area. 

Looking forward to connecting!

thanks

Joseph

[William Kwong]

Hey @Joseph Chacko vellukunnel,

1. Definitely get the structural engineer to look at the joists & support beams to see what's up with the uneven floors. Home could've settled and nothing further to do or you could be seeing a bigger issue at hand that the seller needs to fix. Is it being sold As Is?

Horizontal cracks on the foundation may just be wear & tear. Vertical cracks could be foundation issues. Definitely make those assessments during inspection or prior to making an offer if you can to save yourself the time. If the home is 100 yrs old, I'm assuming it's a definite gut which is going to require new plumbing, electrical, heating, cosmetics.

I spent about $140K reno on my multi family in the heights on NY ave and there were massive problems with it but it was a gut to 3 units & adding 2 bathrooms, 3 brand new kitchens 4 bathroom reno in total, all new flooring, sheetrock , insulation, framing, doors, electrical, plumbing, paint, parts of roof etc. (Heating system left alone and siding left alone)

Get quotes as in Hudson county I've gotten pretty expensive pricing. I have a good GC who I trust who does work for my clients and myself. Let me know if you want me to connect you, not sure if they're too busy lmk. Also, try to get two or more electrical boxes so the tenants pay their own as well as heating zones. Water - landlord plays in JC heights typically. Use LVP flooring, it's cheaper than installing new hard wood floors and they're more durable for longevity purposes. If you only have to resand the flooring and it's cheaper, maybe go with that instead,

JC township will definitely require permits for plumbing, electrical, gas lines. Moving/adding any lines, etc. I would need to know more specs on the house but with material shortages It's difficult to say how much to budget. 80K-120K for full gut perhaps but unsure with lumber beings so expensive and shortages.

I would plan 9 months of vacancy between the pain you will endure pulling permits & having your contractors show up everyday to complete the work & then final inspections to get a CO. Took me longer but I didn't like the contractor I used, and unfortunately he took advantage of my kindness. Live and learn I guess haha.

2. I did an FHA 203K loan and it was a pain but it worked out and I built the necessary equity to BRRRR. I cash out refinanced with a local Hoboken loan officer I know and they were really great. Work with a loan officer & agent to know what your appraised value is before you even do the work. With my refi I wrapped in closing costs as well so avoid paying it twice. It's going to be incredibly difficult to cash out refi BRRRR in the Heights right now, the pricing is too high imo. This was back in 2016.

3. I would talk to your agent about this, they should know these answers like the back of their hand but I'll give my two cents. I think there definitely is still room for appreciation but with a lack of opportunity, inventory wise. If you're looking for long term buy & hold, there's money to be made. - Renting in this area is solid, I've gotten what they call B class tenants and more or less they've been great. Turnover is higher than suburbs. I've had 1 tenant stay for 3 years, the others have stayed for a year on average but it depends. You're close to the bus stop so you'll attract NYC goers & they move a lot around here. But I have the tenant pay the broker fee & in my lease I ask them within 90 days if they want to stay for another year and give them 15 days to respond so I have 75 days to rent out the property to avoid vacancy.

4. I have contractors / an awesome home inspector. My GC should be able to find you the rest.

(Some helpful benchmarks: Kitchens Stay under 17K-20K with materials/labor, bathrooms stay under 8K with materials/labor, Flooring stay around 2.50 per sq ft for labor., Paint try to stay under 4K-5K)

Hope this helps, let me know if you need anything..Cheers!