All Forum Posts by: Jean Carlo Vilalta

Cash flowing $250 off the bat is not bad at all! The 1% rule won't work as is in this NJ market, and even so, you're pretty close to it with those numbers. Look at how much you're cash flowing and how much you're saving relative to having to pay your own rent or the entire mortgage. House hacking will allow you to save more aggressively to better prepare you for your next investment. Great job!

Great job on being under contract!! 

Those numbers could work depending on your expenses for the property. Those taxes seem a bit low for northern NJ, so I'd be curious to know where the property is located. Additionally, are the utilities separately metered (gas and electric)? If so, the tenants cover utilities, but if not, you may have to. Just keep those things in mind. You should also call up an insurance broker and see what insurance might cost you ($120 might be a good enough assumption for now).

Once you have all of that, add up the monthly mortgage, taxes, and insurance, add any utilities you may need to cover (water at a minimum is typical in NJ, but maybe also lawnmowing and snow shoveling, if you don't write those into the leases). Then add 10-15% of the rent and save that for maintenance, capex, and vacancies (another 5% for property management if you're not self managing but even if you are, it gives you the option to hire it out in the future). And then compare that number to the $2,500 in rent you're estimating currently.

Are you cash flowing at all? Are you breaking even or close? Even if you're not cash flowing right now, rents tend to go up with inflation but mortgages are typically fixed (what's yours?). At the very least if you're house hacking, the rental income will cover some of your own housing costs which is great.

Bottom line is that the deal being a good one really depends on a number of quantifiable variables along with what you're willing to accept for your specific situation.

If you're willing to share, give us those numbers I mention here and we may be able to help you out a bit more!

@Brooke B. I'll echo what @Travis Hill said, open up Redfin (my preference of the bunch), type in a county in NJ close to where you're thinking (Essex or Morris county, perhaps), zoom out as much as you want, set a filter by clicking on "Home Type" > "Multifamily", and click on "Remove Outline" at the bottom of the map. This will give you a good sense of where the hubs of multifamily properties are, and you can zoom into the cities to get a better sense of the spread. I own a property in Essex county, and I'd say that is a pretty good place to start. Depending on the quality of the rental you're looking for and your budget, you may want to steer clear of Newark, but look at the outskirts.

Now, you mentioned you're in PA - why not purchase a property closer to where you live? PA has much friendlier laws for landlords than NJ does, the prices are significantly more affordable, and the taxes are much lower than in NJ. Just a thought since it's your first property, but up to you.

Also, agents will typically span a number of cities or towns within their territory. So find one close to where you're thinking and go from there. Look for agents that invest themselves and they'll be able to steer you further towards what they see as the best spots to own an investment property. I used @Shawn Mcenteer in NJ and could not recommend him more!

Hi Dean,

Good on you for getting to the mindset shift and starting to think creatively!

I just closed on a two-family home last week in NJ and though I can't relate with taking out a cash-out refi or a HELOC (I covered down-payment/closing with savings), I do have a good handle on some of the numbers.

Closing costs will likely be about 2.5%-3% in NJ, plus you'll have one or two mortgages, depending on what you choose to do. With a cash-out refi, you'll have to make sure your income from the rentals covers both mortgages on your end, unless you don't mind being in the red for a bit. It'll be tough to make a ton of cashflow from the rental on year 1 in NJ, though it improves well over time. I would probably opt for the HELOC to cover a down-payment/closing on a rental property, and then BRRRR the new property to pay back the HELOC, or cover the HELOC some other way, as it would be much less than a full mortgage on your current property. The beauty of HELOCs is that you can take it out and hold it without penalty until you're ready to use it. With a refi, you'll be on the hook for those closing costs plus the mortgage right off the bat. And depending where you're looking, 400K won't cover the full cost of a rental in NJ. Though you could use it as a down-payment for multiple properties.

So it comes down to the pace at which you're looking to grow, but you're certainly in a great spot with that amount of options!

Welcome to investing in the area! As someone currently under contract on a duplex house-hack in Northern NJ, I'd ask: How you are setting your 450K maximum budget? Have you been pre-approved for that amount? Are you figuring that because you have a percentage of that saved up as a down payment? 

If you are house-hacking and therefore owner-occupying, you have loan options available which allow down to 3.5% down. What type of financing are you seeking? I recommend you reach out to a handful of loan officers in the Northern NJ area and they will help you pin down what your options are, as you may be eligible for more than 450K or may have more creative financing options at your disposal based on your situation and buying criteria.

All of that said, there are options in that price range in our area, but you'd be sacrificing things like quality of the neighborhood or amount of renovations required on the home after purchase. You can run a search on Zillow or Redfin with a price maximum and see where those properties are coming up. Something to consider in your property analysis is flood insurance costs, as some neighborhoods in Northern NJ are in or close to flood zones that would require additional insurance and therefore raise your monthly costs. The BP calculator can help you determine what a good deal looks like. The folks at the "On the Market" podcast from BiggerPockets recently shared this house-hacking calculator as well.

Some more information would help us provide a bit more insight, but this is a place to start!

@Lilian Toscano First step is making the choice, so you're well on your way! As far as actionable items go, I'd recommend speaking with A) a real estate agent and B) a loan officer to really understand the position you're in. You may think that you don't have enough for reserves, etc. and learn that you can actually put less down than you thought, or that your closing costs may not be as high as you were figuring, and actually be in a better spot than you're thinking. The opposite could also be true, but the only way to know is to speak with a couple of agents and a couple of loan officers in your area to really get a sense for what position you're in. I'm sure they'd be happy to help you understand your situation without any sort of commitment.

Another great step is to find a REI meetup group in your area - it's crazy how impactful attending one of these meetups can be! You meet people who are speaking your language and from all experience levels. These are also good places to meet the realtors and loan officers that you'd want to reach out to anyway.

All that said, I have first-hand experience working with @Shawn Mcenteer and definitely recommend you reach out to him and just have a conversation. He is a wealth of information in the North-NJ market and has the investment frame of mind already. On top of that, I highly recommend attending the REI meetup he hosts - I'll be there too!

@Don Rotanz, I'm interested as well, just let me know the time and place! 

Sounds good @Seth Bryan, thanks for the update - BBQ truck looks great too. Looking forward to meeting everyone tonight, hopefully!

Hi @Chris Tran, I was considering an FHA loan for a while on my first property and as far as I understand, you are definitely able to occupy it and rent it to tenants in the first year - that's a big part of its appeal! I was mainly looking for multi family homes though, but I do believe it works the same way for single families, townhomes, and condos (if you were to rent out individual rooms, for example). The only catch, and actually a condition of approval to begin with, is that the property needs to be your primary residence and you are required to occupy it as such for that first year of ownership.

Hope this helps!

Jean Carlo Vilalta
 

@Seth Bryan is hosting a meetup next week on 7/23 in Perkasie, PA. Definitely reach out to him for details, should be a good time!