All Forum Posts by: John Errico

Hi @Edward C.! We actually just set the date--it's Tuesday October 24, same time (7 PM) and location (Houlihan's in Weehawken). I'll make a new top level post here on BP with further details shortly!

I agree with @Francesco G. and @Sant S. but would add that, in Union City, buildings with 3 units and fewer are exempt from rent control (and up to 5 units if you live in one of the units). (Union City has, recently, reduced the amount of rent increases for rent controlled buildings from 3.5% per year to CPI or 3.5% (whatever is lower, but, almost certainly, CPI), and there are also additional restrictions for protected tenants/senior citizens.) 

Because of this, competition for these types of properties (< 4 families) is quite high, but there is an opportunity for adding value if you find one undervalued, or your returns (at the moment) are low, but you're hoping to justify the price by increasing rents in the future. I think that's quite speculative going forward, but rents certainly have increased something like 20-30% over the past several years, at least for my properties (mostly 2 and 3 families in Union City). It's conceivable they could continue to do so, although there are a lot of new buildings/units coming online that will probably stabilize rents at least in the short term.

Hey @Andrew Loa--that's a pretty great list. I don't know where some of those are in the approval process but I'm a little skeptical that *all* of them are going to actually make it to completion. There are also a fair amount of smaller projects I am aware of, some of which are closer to completion (like coming online this year or early next year), and a few of which are south of 30th St (most of the ones you identified are north).

In general, it's been quite difficult to get new building projects approved in Union City for various reasons, mostly centering around the city's zoning laws/master plan. Union City also has quite restrictive rent control laws which make renovating larger buildings not economically viable, since, in general, it's not possible to raise rents beyond CPI (for 4+ family buildings) with very limited exceptions, even compared to other towns in New Jersey. New construction is exempt from rent control, so, presuming that some of these are rentals rather than apartments, that would be a welcomed increase to the inventory for nice, renovated apartments.

At least for tenants, I think the new construction will be great: there are a TON of poorly maintained buildings in Union City--at least in my opinion (as I alluded to above), because of rent control. There is basically no incentive for landlords to do anything re: renovations or maintenance, except to prevent tenants from complaining to the city. The housing stock basically shakes out as: nice 1-3 family homes that have been recently purchased by investors or owner occupants that are increasingly being fixed up (exempt from rent control). This is probably the plurality of homes in the city. There's some nice, new construction, particularly north of 30th and along Park Avenue. And finally there is a LOT of poorly maintained, un-renovated, rent controlled units scattered around the rest of the city. 

From a landlord/owner perspective, I think the glut of new rentals and condos will tend to at least stabilize prices--I've seen this already over the past 8-12 months in some of my rentals in Union City, although, I think with these new units (and with the rising cost of rentals in other NYC environs), there's a different class of tenants increasingly coming into Union City: specifically, Manhattan or NYC-bound young professionals, which will hopefully incentivize landlords owning non-rent controlled buildings to cater to this demographic.

Prior to 2007 there were similarly a ton of proposed construction projects, many of which never came to fruition because of the recession so, hopefully, that won't be the case once again!

Are you an investor, or developer?

Hey guys! Looking forward to seeing everyone tonight! Please ask for John or the real estate group at the front if you can't find us (we will be near the inside bar)!

Hey @Drew Slew! It's a good question... I think part of the challenge of real estate investing is figuring out how to be creative with financing options to achieve what you want. Some general thoughts:

If you want to buy an investment property as a "pure" investment property with conventional financing, you're more than likely going to have to put at least 25% down for the class of property you're interested in acquiring. You could conceivably purchase your next property as a primary residence (and then, actually live there), but obviously this would limit your cash flow on that property since you'd be occupying some or all of whatever you purchased. I'm sure you could easily run the numbers, though, and see what your cash flow and living costs might be (could you rent out the entire condo you're currently at for 2x of what you're currently generating in rent, for example?).

The advantage of buying as a primary residence is that you can put way less than 20% down--hypothetically as little as 5% for conventional loans (or 3.5% for FHA loans) with some limitations on the time of property you're buying and so on. That's a pretty tremendous way to take advantage of leverage since the amount you'd put down is so low, and you're building equity you can then borrow on in the future and possibly living for free, even if you actual cash flow on that given property is low. You can certainly buy a multi-family home as a primary residence, for example, and "house hack" by renting out the additional unit(s) which would allow you to both take advantage of putting little down and also either living for free or even generating profit per month... I think the popularity of this option is certainly one reason why the price of small multi-families in the northern New Jersey area has gone up a lot recently.

It sounds like you got a good deal on the condo--you could consider taking equity out of that to put towards a down payment (HELOC or refinance, for example) or other purchase of a house, particularly if you're in a situation where you need to put 25% down--though some lenders may give you a hard time about, say, using the proceeds of a HELOC for a down payment.

For buy and hold type properties I generally don't think "other" types of financing (like bridge loans or hard money loans or whatever) generally make sense, at least not for the greater NYC area, unless you truly need immediate liquidity and are anticipating paying it off from some other sources of funds very quickly, or you find a deal that you can force appreciation in by renovating (like a flip, but you end up holding it). Even if you were to find such a deal, appraisals are always a pain, so I'd be worried about refinancing out of the loan if the house doesn't appraise at what you need (plus you'd need a fair amount of capital to renovate it and possibly even acquire it to begin with)

Another option that may or may not be available to you sort of depending on your personal network would be finding more passive investors (either debt or equity). You could arrange for them to own part of the property that you acquire, and you can take a management fee, or finder's fee, or anything equivalent for finding the property and putting together the deal. If the market continues to appreciate it as it is, you could hypothetically buy them/refinance them out later, so long as this was permitted in the agreement you structured with them. Local banks might be more willing to be more creative with financing particularly with partners (for example, you'll likely have to personally guarantee the note but if you were working with partners you might be able to charge a premium for doing that, if they're not also guaranteeing it... and so long as your bank permits you to do this).

There are probably an infinity of other more creative options available, but, realistically, at least in the greater NYC market, your options are limited by the general price of most properties, and by the market (lots of demand at the moment, relatively little supply), so those are some of the strategies I've employed. Unfortunately, even making $1k/month on a, say, 2 family property with a traditional/amortizing residential mortgage (which would be pretty good!), it'd still take quite a while to save up for a second property, presuming you'll have to put 25% down again and don't have any other creative financing options at your disposal.

Best of luck!

There are a ton of meetups in northern New Jersey: feel free to check out the "Events and Happenings" section of BiggerPockets! 

Hey @Mohammad Farooq: just posted another event on BP for it, but the next meetup will be August 22 (Tuesday evening). Hope to see you there!

Hey everybody! We're having a monthly meetup for investors and soon-to-be investors in northern New Jersey on Tuesday, August 22nd starting at 7 PM at the Houlihan's in Weehawken (that's at 1200 Harbor Blvd) (ask for John or the real estate meetup at the front). There should be ample parking and ample space!

We've had great turnouts in the past with a lot of BiggerPockets members and are hoping to see many more next week!

As with our meetups in the past, everything is very informal: we'll be networking and exchanging tips and stories over drinks near the bar, there won't be a set agenda. We usually have people with a very wide array of experience, ranging from people curious to get involved in local real estate investing, to people just starting out, to developers and other real estate professionals. Many of us invest in the local markets (Jersey City, Union City, North Bergen, Hoboken, Weehawken, West New York, Hudson, Bergen and Essex Counties generally, and so on)!

Please message or PM me with any questions. If you can't make this one, we do it every month on more or less the last Tuesday of the month. Looking forward to seeing everyone very soon!

@Nick Intrieri

Welcome @Brook L.! There's a great community here of investors in the northern New Jersey area. I live close to you, so feel free to message me if you'd like to grab coffee or a meal sometime!

Hey @Jose G. didn't realize about the other meetup for the Hudson auction--we usually will go about 2 hours, so things will start wrapping up around 9ish. You'd be more than welcome to come late, or to come to the one we'll likely hold next month!