All Forum Posts by: Satha Palani

Hi,

I am new to the city and have a keen interest in real estate investing. I have been driving around the neighborhoods in the city trying to get a feel for what each of them have to offer in terms of vibe, potential etc. Here is a map i put together

Based on my limited knowledge of the city:

1 - City center - old building being rehabbed, some new construction; mostly condo. Mostly commercial. I felt like this is still a mixed bag but with potential as the new amenities get built out.

2. Area 1 - Did not get a great vibe from this neighborhood . too many boarded up homes, trash on the street etc

3 - Triangle below Uni - Closer to university hospital, the houses seem nicer, the closer i got the the freeway to the west, the more run down the neighborhood looked 

4 - Clinton Ave - Only drove around the cemetery area, some of the streets seemed very nice. Yards well kept. Spoke to an old lady who had lived there for 30+ years who liked living there. Parts of this neighborhood reminded me of the North side in Richmond Va where i am from.  

5 The wedge and area 2 - have not had the chance to survey yet.

I know a few drive bys are not enough to be able to understand the lay of the land so i may be totally of base; which is why i would love to hear from folks that are more seasoned 

Hope to get a good conversation going.

thanks,

satha

congratulation on having shored up a nice nest egg at 40! I think the real question is can you and your family live off the 36K a year in rental income? Ideally you would want a setup where all your expenses are being covered by your passive income and keep the 300K as a contingency fund. Factor in things like vacations, replacing the car, medical expenses etc. If you stop working at 45, you are looking at 25 years to before you can start collecting retirement benefits, that a long time. If anything I would over compensate for it a little.  

Hi ,

section 8 is the name of a program that provides housing assistance vouchers to certain people who cannot afford rent on their income. It is a government program where HUD (housing and urban dev), pays the landlord a portion or all the rent.

Depreciation is tax related. Has nothing to do with section 8. If you but a rental property for 100k and the value of the land is 20K. You can depreciate the portion of the purchase price (80K) that is not land (value of the building). This is because the IRS assumes that when you use the building (as a rental) a portion of that building will get used up "consumed"; such that after some time you will have to repair / upgrade / rebuild.

Hi,

In most cases how you finance determines what return you get. 

If your total outlay is 70K (20K purchase + 50K rehab) and the rental is $700 then you are making a 12% gross return on your all cash investment. Assuming a 25% cost factor (25% of all rental income is consumed by expenses); your net return is 9%. 

If you finance the house (80% margin). you borrow 56K; your net cash outlay 14K. you will pay $260/mo in mortgage payments to the bank. Assuming taxes and insurance are rolled into the 25% cost assumption we used earlier. Your monthly net rent less expenses is $525/mo. You pocket $265 /mo. Which is about 3K a year; a 20% return on the 14K in cash you invested.

This is purely illustrative; borrowing money has costs associated with it, not to mention credit impacts etc. You will want to factor those in as well.

I bet there are plenty of 50~60k mortgages around.

Have you tried going to the county office and looking at the tax records? the records are public and sometimes available online. Once you get the name of the owner, go look up the lien records at the county courthouse (also public but rarely online). Somebody must be paying the taxes on the place else the property would have been a tax sale by now 

How many bathrooms? i am assuming 2 kitchens. what type of finishing are you looking at? Rental grade or better? Are you replacing HVAC? Is there roof work. etc. Tough to say without really knowing all the specifics. $35K per unit for a full gut job on a 2K sqft unit feels a bit low to me. 

Is your current mortgage an FHA (did you put less then 20% down on it)? id so you won't be able to buy the duplex with 3.5% down. You can only have 1 FHA mortgage at a time.

If you you are buying the duplex using an FHA loan then you must occupy it as a primary residence.

what would your mortgage be on the duplex? 

The spread on your current home (~$200 / mo) feels a bit thin but is potentially doable if your are self managing and are handy enough to take care of any issues that come up on your own. 

hi @Ray Jacobsen too bad i am no longer in RIC. For my own knowledge, do you need a permit to operate a rooming house in RIC?

Hi I live in the area and have a 3 family in the Ironbound section of newark under contract. My second go at house hacking. I looked at JC and Hoboken to start with as well but found that even with REOs / foreclosures its very difficult to make the numbers work. 

My suggestion if you are looking in Northern NJ is, cast a wider net. Kearny, Harrison, West NY, Guttenberg etc.  

Also read up on 203K loan; you can do a FHA 203K with 3.5% down. Below MV multi-families here typically need a fair bit of updates.

Thanks @Odie Ayaga ; found some of Brandon's articles on here. I will check it out