All Forum Posts by: Doug O.

County wide numbers are not going to be accurate due to the fact that there are such differences between the towns...ie, you're going to find higher cap rate in East Orange than you would in Montclair due to risk. Differences are substantial, too. You could be looking at a 10-12% cap in east orange versus a 4-5% cap in millburn. Really depends on where you are talking about.

I just closed a cash out refi of $1mm+ 3 months ago @4.25% for 20 year am, 10 year fixed, with 10 year option with capped increase in rate. They are out there, just need to work with the regional lenders versus national in most cases.

As to the OPs question, I was successful in borrowing on a legal 5 unit property that the bank treated as a 4 unit for lending owner occupied, but it took me nearly 6 months to close the loan after jumping through hoops. Got a 30 year fixed rate @ 3 7/8% as well, which is great for me, but I cannot stress how difficult a transaction this was to pull off. Since 5 units technically puts you into commercial status, in your case with 8 I don't see it happening. I had the benefit of a stairwell between 2 units so I was able to have the bank treat it as a duplex unit versus the legal 5 units with the town.

Ani, St. Peters is by Journal Square, not Bergen/Lafayette ...

Bergen/Lafayette is still sketchy, I don't care what other investors are saying. Take a ride down Atlantic Ave into the heart of that area, and all you see is bars on windows and caged in porches.  Just because the barrier of entry to an area is lower, doesn't guarantee that it will explode in coming years. People have been talking about it for the past 10 years, and yet it remains a C/D area.

I forgot to mention - at 5-6 units, in order to see the kind of return you'd expect, I presume you will be self managing? If you were to bring in a PM for this, you'd lose anywhere from 5-10% of your gross rents, which would probably eliminate a good chunk (if not all) of whatever cash flow you were anticipating.

This is something else I see all the time where potential investors/landlords do not take into account the cost & time of managing the property. It's something that is so often overlooked. Generally speaking, in order to make money in the landlording business with smaller properties, you really need to self manage (obvious exceptions apply, where you are able to buy at discount, though very rare in this area).

I've been doing this for nearly 15 years now and am as hands on as I can be since every repair I do saves me money and adds to the bottom line. That means that I own a toilet snake and not above the periodic cleaning out a clog versus paying a plumber or handyman $100-200 to go out and take care of it. That stuff adds up very quickly, and with the margins as low as they are in this part of NJ you have to really pay attention to expenses. If you had already factored this in, great. If not, make sure you discuss with your partners about who will be responsible for dealing with tenants, who will oversee making apartments rent ready, who will handle marketing of vacant units, who will be taking care of oversight of any capital projects, etc. It's definitely not as easy as some people make it out to be.

Not really - rent control in UC is more lenient than other nearby towns, say Hoboken or Jersey City. It's more the tenant profile you encounter there. I've owned in UC for the past 7 years and while I target the lower rent demographic (easier to fill vacancies and not as demanding with amenities), I've found the challenges of dealing with tenants to be more demanding that in those other towns. First piece of advice, make sure you speak Spanish (seriously, not making a joke). I'd say 2/3 of my tenants speak no English. Second, many of the tenants fry foods which tends to cause a lot of work in making units rent ready during turnover, and in many cases ruins nearby cabinets. This has been a huge pain for me. I've installed tile backsplashes in an effort to curb the damage and make it easier to clean, but in some cases it's a huge amount of work to clean up. Third, be prepared to have to go to the property and collect rents each month since many pay cash. This tends to be the case with about 50% of my tenants. I think it's a cultural thing where a lot of them prefer to hand me the rent directly and receive a receipt. Plus, many of them do not even have bank accounts. Again, this applies more to the lower income tenants. May sound silly, but a lot of these things really differ from town to town. UC is also tough to capture high end rents, depending on where you are. One of the main reason I seek lower rent properties is for the shorter vacancy periods. I know that with an $800 1 bedroom, I can get new tenants within 30 days. A block down I see a 1 bedroom asking $1100 or more, and it sits for months. Keeping in mind that for $100 difference in rent, one month of vacancy takes a year to recover (which a lot of stubborn landlords never seem to recognize)...

I'm not sure about the steady appreciation in any of those areas, however, they are all very solid rental markets. There is no shortage of decent tenants, but each town has its own nuances. Guttenberg is generally the most difficult to deal with, although Union City has its own unique set of challenges. I have dealt with all 3 directly & indirectly for several years, so you'd need to be a little more specific on what you're wondering for me to assist more.

So I'm wondering who here has any direct experience or knowledge of triggering the due on sale clause in a loan from transferring to an LLC? Have been reading about people who heard about this happening, but never heard from anyone who has actually done it recently either with or without consequence from their lender.

I'm debating whether to attempt it, since all of my experience with it was from more than 5 years ago when it could be done with little fanfare from lenders. Now that the climate has changed, it seems that the rumors floating around are that you will get called by your lender if you transfer out of your personal name to an LLC even if you continue to pay on time as in the past.

Anyone??

Surface mounted wiring corrects all the deficiencies of knob & tube, but it's ugly and could appear cheap in most cases. You can make it quite secure by using the metal surface channel and screwing it in with the metal brackets. I've done this in numerous common areas (hallways/stairwells/etc) for the updating of lighting & for fire alarm devices. If done correctly in common areas, it looks fine. I've also done it inside apartments, where I can't get away from the fact that it just gives off a cheap appearance.

Why create an S corp? Why not just create another LLC that acts as holding company? It is easier to manage and doesn't have the corporate requirements of an S Corp all while still providing similar benefits... I operate in this fashion along with a friend who is also an investor. It leads to clean income tax filings and adds a layer of separation from my personal assets.

Would love something like this in Hudson County... Always struggling to find replacement vendors for various services after good ones turn bad.