All Forum Posts by: Moises Mari

@Cody L., finally some words of wisdom, that's exactly how we do it with our property management company here in New Jersey.

@Charlie Moore, those landlords should hire a professional property management company. Our management company doesn't chased rent payments since we opened up and we manage in the high numbers. These include section 8 tenants. It's all about the processes you have in place in order not to have to chase rents.

@Zeb Lopata, many times lenders are willing to work with you ahead of time in order to give you an idea of what to expect and allow you to prepare for the purchase process.  

Considering I'm in the industry myself and having a first hand look on the amount of time it takes to work/prepare our clients for the process, I will suggest you searching for lender now, once you find one, ask them to help you prepare, start working with them, and if at all possible stick to them as they will be working to help you.  Most lenders have pretty competitive rates in my experience . 
Even if you are 6-12 month away, its good to speak to a lender now and even run your credit, this way you will know exactly what you need to be ready when the the time comes and not have any surprises then. 

Hi @S Taylor! 
We normally get some quotes from insurance brokers and compare coverage/price between them. We usually end up with Philadelphia Insurance Companies as they usually come back as the most reasonably prices. 

I have also heard of good quotes from Allstate, I haven't tried them yet but that is my next to do.  I have noticed that a lot of the bigger insurance companies or most known normally have higher rates. 

Not long ago I got a quote from a company that insures my cars, etc. and I was surprise to see that the quote was almost double of what I currently pay, so using bundling up insurances don't always end up with lower rates. 

Best of luck!

Hi @Zeb Lopata! Welcome to Biggerpockets! 

I suggest you try connecting with a lender even if you are not ready to purchase tomorrow, as they will be able to give you a more exact number on the amount of cash you will need for down-payment and closing costs.  It's best to get all the information up front, this way you can prepare and have everything you need ready .

Just to give you a ballpark figure:

If you are working on using 3.5% down-payments, normally you may need approximately between 3-4% of the purchase price for closing costs.  This is only an estimate, it may fluctuate depending on taxes and lending/points cost.

We have great Lender contacts that we can refer you to if you need someone.

Best of luck! 

Regards,

Moises 

Hi @Jacob Schwartz!  I can probably share some pain points that I find investors running into in many occasions. However, I find that some investors run into these issues because they have either inherited the headaches/tenants, lack knowledge in construction, or lack knowledge in the screening process of new tenants. 

1) Inheriting Issues: One of the major pain points I have noticed on some of our new management clients is that during the purchase process they may have inherited a headache tenant that either decides to stop paying rent as soon as the property is sold or they are just a bad tenant, messy, don't report repairs (water damage) etc. 

2) Lack Of Construction Knowledge: Sometimes a new investor may get caught up in the excitement during the purchase process and miss some negotiating opportunities during the home inspection process. This is obviously not always available and definitely not promised, however, with experience you learn what not to ignore. This is why is crucial for you to team up with a good home inspector or investor friendly real estate agent, this way they can guide you and recommend you people that have inspected multi-family homes in the areas you are looking to purchase in. 

3) Lack Of Experience During The Screening Process: Many will share that the screening process most of the time will either make or break your investment. As a new landlord many do not perform the necessary research to vet a new tenant. The result in many occasions is a bad tenant, which in turn converts to an unnecessary expense for the new investor. 

There are obviously more downsides, however, based on my experience these have been the most common ones. 

Best of luck!

Regards,

Moises

Hi @Terence Eng! Welcome to Bigger Pockets!!  I actually started back in 2012 to heavily invest in Essex, Hudson, and Bergen Counties, Northern NJ. 

Buying and holding is a great choice due to the many benefits it brings to the table.  I'll leave you with a few tips that we have learned by buying, managing our own portfolio as well as managing properties for our clients.  I truly wish someone would have shared these with me when I started.

1) 3-4 Families - If you are looking for buying and holding and getting cash-flow, I would suggest sticking to 3 Families and up as after running your numbers you will notice that these properties will most of the time bring you a higher cash-flow then smaller properties due to the high taxes here in NJ.  

2) Contractors - Not every contractor is made equal, obviously as investors our goal is to attempt to get the highest return on investment possible. However, it is important to stay focus on the end goal which in my case is to provide a good quality product which my tenants will be happy to live in. Lower priced contractors are not always the best call, if you hire a lower price contractor, in some cases you will get stuck doing the same job twice. I'm not telling you to overpay for a job, but definitely get a few bids and do not go for the cheaper guy, we made this mistake a few times when we started and suffered dearly. 

3) Property Taxes - Obviously keep an open mind on where to invest, at the end all that matters is that the numbers work. You mentioned two areas that I have been looking into for many years and those are, Garfield and Newark. The great thing about these two cities are that they both have low property taxes. As you probably noticed by now, property taxes will quickly eat up on your returns so these may be some areas where you can start searching. The downside with these two areas is that in Garfield, the inventory for these multi-families are pretty low and Newark, although the inventory is a little healthier, the competition is much higher.

4) Tenant Screening - Once you find the right property and get through the renovation stage, if any, the screening process will be the last place that can eat your returns. Even though we manage properties in C-D class neighborhoods, you can still have great tenants, the secret is learning a good screening process in order to hopefully not have to deal with evictions.

Best of Luck!

Regards,

Moises

Hi @Stephanie Danos!  Welcome to Biggerpockets! Awesome to hear you are starting your real estate investment journey.

Being from Jersey, investing in Northern NJ and Managing Properties for other clients here in Essex, Bergen and Hudson County I definitely understand the challenges of investing in NJ. I'll point out some benefits of investing in multi-families rather than investing in single family properties.

1) Taxes - If you analyze 1-3 family units, you'll realize that in most cities in Northern NJ taxes for 1-3 family properties will range around $7,000-$12,000, (approximately) meaning that the more units on a lot, the lower tax per unit price you will be paying.

2) Capital Expenditures - Things such as the property's siding, roof, and windows; when purchasing a multi-family dwelling, whether you are purchasing a 1 or 4 family property, in most cases you will only have one building to worry about, meaning, one roof, normally 4 walls of siding, etc. Yes, in most cases the multi-family property will be slightly bigger, but in most cases you will benefit from the fact that is only one building and not several 1 family homes, roofs, sidings.

3) Vacancies - When renting a 1 family home, if the tenant vacates the property unexpectedly you will have no cash-flow coming in. When purchasing a 3 family home, in my experience, if you purchase it correctly, in most cases you will be able to cover most of your expenses with the rents of 2 units, (This is assuming you purchase it at 25% down). Even the perfect tenant can run into financial or sometimes personal issues that will force them to move without notice, trust me, it just happened to us lol...

Bonus - Going back to my 1st point, I think you may have a hard time finding cash flowing 1 family homes here in Northern NJ due to the high taxes.

There are several other benefits but I don't want bore anyone ;) - Although as you mentioned in some cases single family renters may be a bit more caring for the property, this is not always promised. Let me know if you have any additional questions!

Welcome once again and best of luck!!!

Regards,

Moises

Hi @Jason G.!    We own and provide property management services to several 3 family homes in Newark, Essex County and this is my take on your deal. To begin, are these 3 bedroom, 1 bath apartments?  How much is this property selling for?

- Tenants: If this is a rehabbed property and it's renting at around $1,300, I'm going to assume they are 2 bedroom apartments, if they are 3's you may be able to increase rents a bit. 

- Rent control: In Newark 3 families and above that are not owner occupied are rent control apartments, if you move forward request an OPRA request and find out if rents are registered and if you are allow to charge the $1,300 they are charging, many newer investors never look into this. 

- Budget: Your budgets seem fair, I would consider a little higher for management fees as 10% is the standard rate, but management also has lease up fees yearly, and onboarding costs, along with some additional things that come up, I would safely say 10-12% to truly estimate the cost of management.  Managing properties in Newark can be challenging specially in certain areas.

- Vacancies: They are normally not a huge issue in Northern NJ, if the price of your rental is right.

- Screening Tenants: Don't ever count on a flipper to carefully screen tenants, we have had to evict tenants from newly rehabbed properties many times (Not to scare you) but is good to go into these deals with a clear expectation. I don't want to down talk flippers in this field or areas, but unfortunately in some cases, they are looking to fill the apartments so they look attractive to an investor, also many times this is not their expertise, so they may not do a great job at it.

- Water/Sewer:  Regarding to your water/sewer expense, we own and provide property management services to many 3 families in Newark and our monthly water/sewer expense roams around $120-150 monthly, which brings the annual expense to $1,500 on the lower end. @Satha Palani   (Any other Newark investor feel free to chime in)... 

Best of Luck!

Moises

Hi @Samuel Garcia! Personally when looking at properties to invest here in Northern NJ, I focus more on cash on cash ROI when searching for something to purchase. The high taxes make it hard for some of the other quick calcs to work. At the end of the day, if my net return is higher than what my return on the stock market would be, I'm satisfied. You have to figure out what you would consider satisfactory and take it from there.

Unless you are flipping or are doing full rehabs in NJ and are running your own crews, 15-20% returns may be challenging to achieve once you incorporate all the costs of owning an investment property, including property management fees. 

Best of luck!

Moises