All Forum Posts by: Ruchik Gandhi

Hello everyone,

I am new to the real estate journey with a focus on the northern NJ market. Reaching out to other investors: one thing I have noticed is that it is impossible to achieve positive rental cashflow at 80% LTV financing in northern NJ mainly due to high taxes and high property prices. As such, it seems the minimums required in the property prior to purchasing recommended by experts almost never meet (1% rule, positive cashflow of minimum $100, CoC return of 12% or higher, etc). If going by these rules, it seems like there are no good properties to invest in northern NJ. Am I missing something? I assume vacancy rate to be 10%, is that too high for northern NJ? Does investing in norther NJ mean you have to rely on appreciation to recover negative cashflow?

I appreciate your help with this. Thank you in advance.

Hello everyone, 

I am new to the real estate journey with a focus on the northern NJ market. Reaching out to other investors: one thing I have noticed is that it is impossible to achieve positive rental cashflow at 80% LTV financing in northern NJ mainly due to high taxes and high property prices. As such, it seems the minimums required in the property prior to purchasing recommended by experts almost never meet (1% rule, positive cashflow of minimum $100, CoC return of 12% or higher, etc). If going by these rules, it seems like there are no good properties to invest in northern NJ. Am I missing something? I assume vacancy rate to be 10%, is that too high for northern NJ? Does investing in norther NJ mean you have to rely on appreciation to recover negative cashflow?

I appreciate your help with this. Thank you in advance. 

@Elex Price

It is up to your loan broker to help you adjust the tax profit (loss) to show what the business is making. A good broker always works with their client to understand the adjustments and explain those adjustments to the lenders. Most lenders understand that if a tax return is showing a loss it does not necessarily mean the business is making a loss but its up to your loan broker to prove it to the lender by the way of explanations. Hope this makes sense.

Ruchik Gandhi

@William Kilburn

When it comes to Hard Money, not all loans are high interest. The ones which tend to be high interest rates are the short term loans which includes rehab financing, etc. There are a lot of conventional loan options which are fairly competitive to bank rates provided certain conditions are met.

@Peter Tverdov

You can also try websites like homepath.com which lists REO properties.

@Graham Reinhard

The financing also depends on what you intend to do. There are multiple financing options in the market. Different types of financing are relevant for different type of properties (buy and hold, rehab and flip, etc). Instead of going with the cheapest option out there, focus on which option gives you speed and ability to close the deals in the most efficient way and addresses the issues posed by the strategy you are pursuing. Send me a note if you have any question about finance suitability.

Ruchik Gandhi

@Cory Peters You can go with a Fix and Flip loan where you can get up to 90% of purchase price and 100% of the rehab cost financed. These however are typically short term options (12 - 18 months), so if you plan to hold on to them (ie rehab and rent out), you would have to refi at the end of the term. The good part is that these are typically interest only and no pre-payment penalty so works perfectly for a rehab and flip strategy. Hope this helps. Feel free to ask questions if you have any.

@David Sawyers

Hi David,

You need to have multiple exit strategies planned up and determine what is your plan A vs plan B based on the ROI and market conditions as @Jim Goebel mentioned.

As far as financing goes, it depends upon what your plan A exit strategy is. Eg. if your plan A is rehab and flip, you can start with fix and flip financing as it is the quickest and easiest form of financing to get and refi it with conventional if something goes wrong and your go to plan B (BRRR).

Hope this helps.

Ruchik

Hope this helps

@Matt Crawford Another option for you could be to combine the 5 unit property and 7 unit property together and go for a portfolio loan. That way you can cross-collateralize the equity and even get a cash out in certain cases and finance the new acquisition while keeping LTV low to attract better rates. Let me know if you need any help crunching rough numbers.

Ruchik Gandhi