All Forum Posts by: Sunny Burns

Hey guys thanks for all the feedback. So I guess most of you are thinking that this only an okay deal... it doesn't seem like it will quite reach my goal of $1000 a month, and it will require almost all my capital as a down payment, so I may move on. Thanks.

@Ahmad H. yea I know I should of had higher Maintenance, but I figured with the new recent renovations, and everything looking so well maintained it would be less. But yes I should err on the side of caution. And regarding Financing, I contacted the NFCU which I am apart of as well, and they only allow 5% down for single families and 2 family properties - do you know if you could do the 3 or 4 family with your credit unions? The great thing about NFCU is that they also don't require PMI for a majority of there loans, including that 5% down conventional 30 year fixed loan - so I am tempted to just go with a 2 family.

@Andrew Davis , I like your quick calcs, and they were pretty close with my educated guessing.

@Steve Wilcox The reason I had a lower 5% vacancy is because a majority of the tenants are elderly and retired who have lived there 5+ years and it doesn't seem like they are going anywhere. Also from my basic research it looks like a single bedroom apartment in the area will go pretty quick... should I be more cautious?

I am a first time home buyer as well as a newbie Buy and Hold REI, so trying to get as much feedback from experienced investors as I can before moving forward. My goal for my first property is to achieve $1000 cashflow a month.

Background on Property

It is a 4 family property North New Jersey built in 1970, 3 single bedrooms, and one 2 bedroom. A tree fell on it in 2013 and it was insured so the owners redid the roof and fixed everything up. So the exterior is all newly renovated. The whole house is electric, electric hot water heaters, baseboard heating, etc. All separately metered. 

The rooms are smaller but the layouts of the rooms are great and are in excellent condition. The appliances could use a little updating but look good and work, really needs nothing. It is on a nice quiet residential street; there is a shoprite only a block away and a train station two blocks away. It is fully occupied, with long term tenants. The shortest being there 3 years and the longest being there 15 years. 3 of the units have single person tenants and the 4th has a couple in it. Each unit has 2 parking spaces and there is a coin operated washer dryer in the bottom hall.

Price: $360,000

Income

• Rent: $1050 + $1000 + $950 + $900 = $3900/month 
• Coin Operated Laundry Dryer = $100/month

Total Income = $4000/month = $48000/year

w/ 5% Vacancy = $45600/yr

Expenses

Info From the Owner

• Taxes: $10,000/yr
• Water&sewage: $3,000/yr
• House electricity bill: $50/month = $600/yr
• 5 separate meters: all tenants pay own electricity & electric baseboard heat

Assumptions(This I would like help on)

• Snow removal & lawn care: They had a family friend do it ... so no idea = $2000/yr??
• Maintenance & Repair = $2500/yr??
• Insurance - $2000/yr??

Total Expenses = $20,100/yr

Operating Income & Financing

Total Operating Income = $25,500/yr

My plan is to put 20% and go Conventional 30 year Mortgage. I've spoken with a 3.885% rate. I would be owner occupying but I am not calculating for that, since I don't plan to stay in the property too long, and am more looking at future cashflows.

So with $3000 in Closing costs & 20% down, it would require cash outlay of $75,000. 

Mortgage would be $1356/month, $16,272/yr.

Annual Cash Flow: $9,229

Cash ROI: 12.31%

Total ROI: 19.20%

How does it look?

I thought this was quite a good read for a person buying their first property. If you don't really have a clue, give this a read, it's quite thorough. http://njhousing.gov/dca/hmfa/media/download/buyer/hb_firsttime_homebuyer_guide.pdf

@Elizabeth Colegrove , I really like your blog - I definetly will be reading through it. @Phil Zofrea , maybe you want to consider reading Elizabeth's article on LLC's http://www.reluctantlandlord.net/crash-and-burned-with-an-llc/

@Mark Langdon Yes its a regular residential loan. We plan to owner occupy, we currently do not own any piece of real estate. We are looking for a triplex or quad. And because of that @Phil Zofrea I don't think I'd be able to put it in an LLC, otherwise I'd probably be forced to get a commerical loan - at least I think I would, but thanks for the tips.

@Elizabeth Colegrove that's awesome to hear another young couple succeeding in securing their financial future.  We're a little slower than you guys at 24 and 26, but I'm Glad to hear of your success, it gives me more confidence and hope. I definitely want to begin researching short sales and foreclosures more - they seem like they can provide some good opportunities. I will definitely be checking out your blog, thanks for the tips.

Hey @Mark Langdon seems like you have a similar outlook to my own. Has being conservative(20% down, 15 year mortgage) slowed you down? That's what I worry about, but same as you, I hate the thought of PMI, and want the cheapest rate possible.
Do you have any recommendations for banks or mortgage brokers?
I am currently looking at Picatinny Federal Credit Union, 3.125% 15 year, 4.125% 30 year and they offer $1500 flat fee closing costs.

Hey thanks for the wekcomes guys.

@Shawn Mcenteer I am still open to pretty much any investing strategies, but my current though is to try to get as low a mortgage rate as possible, and I feel the best way to do that is with 20% down.  I am still playing around with whether I want a 15 or 30 year. On the one hand I will be gaining equity in the house a lot quicker and the mortgage rate will be lower on a 15. But with a 30 I'll be able to have more positive cash flow to potentially buy another one quicker. Thoughts?

Hello Biggerpockets Community! I’ve been listening to the BiggerPockets Podcasts for a little over a year now, and feel like it’s about time I interact on the forums and introduce myself. I am a recent college graduate of Stevens Institute of Technology and am now working full-time as a Mechanical Engineer at Picatinny Arsenal. I am very happily married to a wonderful elementary art teacher. We are both very interested in getting an early start towards our goal of financial freedom. We both like the idea of becoming buy and hold investors. Our goal is to buy a 3 or 4 multi-family property along RT.80 in North NJ by the spring. We are both smart with our finances and very good at living below our means. We’ve paid off our student loans, have no car payments, and live on the second floor of my parents house(We pay them rent and get along great). I feel we have finally saved enough to put 20% on our first Real Estate Investment Property. I am currently shopping around for a pre-approval, I think I will end up going with my Credit Union.

We both have no real-estate experience, but in preparation we have been listening to the biggerpockets podcasts on our commutes to work and have thus far read/reading:

-BiggerPockets Ultimate Beginners Guide

-ABC’s of Real Estate Investing

-The Richest Man in Babylon

-Millionaire Next Door

-Bigger Pockets Rewind

-Investing in Duplexes, Triplexes & Quads

-What Every Real Estate Investor Needs to Know about Cashflow

-NJ State’s “Buying a Home” guide(Great reading for a first-time home buyer) 

And although I have no Real-Estate Experience, I do have some similar experience since I used to buy and sell cars to put myself through college. I made my initial investment capital by working nights at Taco-Bell; The day I quit, I bought my first car - a 1999 Mitsubishi Mirage, it took a month to flip it, but I more than doubled my initial investment. I went on to sell 18 more cars during my college years. I would buy low, and learn to fix what I could through watching youtube. I graduated in 5 years with a bachelors and masters, and minimal student loans. Because of this experience, I feel strongly that my Wife and I will do very well in the field of Real Estate Investing. I hope to get to know and learn from the seasoned investors in the area. We are interested in joining in on any local meet-ups in the area. Thanks for reading, I hope I don’t sound too boastful, I just want to let people know that I am a serious investor. Based on everything I have said, what next steps should we take before buying an Investment Property?