All Forum Posts by: Vik Nirwal

Thanks again for your response, @Jordan Gregg

I totally understand what you mean by "analysis paralysis" which is something I find myself guilty of at times. All the more reason, I feel it maybe time now to act before it is too late ( by means of interest rates rising towards 5-6 % next year - when it would make very little sense, if at all, to buy a newer multi family )

1. You are right that I did not account for vacancy but that's partly because this property is located at a 7 minute walking distance to JSQ Path trains and 2 minutes to all buses on Palisade avenue on one side and Central avenue on other, so I think this would be a commuters dream. I would be happy to price the rent slightly lower than marker rents - if it ever came to that - just to avoid a vacancy. Do you still think this is an issue ?

2. I would manage the property on my own as I am looking to occupy one of the units for the next 2-5 years.  If I needed to move out of NJ, I don't know if I could self manage at that time. Probably not.  Is the 7-10% estimated cost of managing the property reasonable ? Isn't it more like 5% which would mean around $250 per month in this case (assuming 5000 rent roll ). This is brand new construction so I would figure less things to fix / manage. I could be wrong and 5% maybe less but if it turned out to be more than that, I would probably have to self manage.

3. As for the rents, I think I am being conservative . For a new construction 3, bedroom 2 bath in JSQ area, I can get 2400-2500 at least in todays market - Obviously things could change if the economy tanks in which case I would expect around 2100; which means no cashflow but still paying towards principle and building equity.  Isn't it still better than continuing to pay rent ?

I plan to hold the property for around 10 years. I expect ( or rather hope ) that within next 10 years I would get a chance to sell and break even if not make any money on this.  If I can sell for 850K or more at any time after first 5 years, I will do that - I suffer no loss, enjoy my own home and build whatever little equity I could.

I understand the margins are rather tight but if I miss this opportunity- I don't know if these margins are only going to get tighter. I don't have any experience to buy , rehab and sell older homes so I really need something newer and as long as my cashflow remains positive and I can sell for more than I paid - I am good. If I let this pass due to inaction, I might have to remain a renter for another couple of years - specially with the ever increasing prices in Jersey City and anticipated higher mortgage rates.  I feel I would have truly missed the bus then.

Does it make sense to put a larger downpayment to reduce borrowing costs ( in a high interest rate env ) and therefore use the large payment to generate a cashflow ? Is this a sound strategy if one has cash ?

Hi @Jordan Gregg , thank you for the reply. 

I appreciate inputs from folks like you to help me steer in the right direction.

So here is my calculation.  As I mentioned in last post,  I am a first time investor so I maybe making some assumptions:

Purchase Price = 800K,  Down Payment =180K , Mortgage = 620K @ 4% interest rate, Property taxes = around 16K but you get 5 year abatement on new construction so we can figure 12K for first 5 years. I would budget about 200 per month for home owners insurance and water bill + 200 for incidental expenses/ regular upkeep.

So with that, my monthly payment comes to about 4400 per month.

This is a 2 family with one unit being a 4 bedroom duplex and other is a 3 bedroom .

If I am not living in the house and rent both - I think I can get 2200-2400 for 3 bedroom and 2400-2600 for the 4 bedroom ( I could be wrong but this is what  the going rent in JC these days looking at craigslist ) , so net rental income = 5000

Monthly cashflow = 5000 - 4400 = 600 per month or 7.2K per year which is a return of about 4% . Not great  but when you consider that your are paying off your mortgage and building equity - its not that bad either ?

After 5 years , when the taxes go back to full 16K, profit will be halved but still positive assuming I can keep it rented. 

I am looking to buy and hold as I think the market is at an all time high at the moment and I do not expect more appreciation specially with rising interest rates .

Thoughts ? Do you agree with the above math ?

Hi,

I am a first time home buyer . Have been renting in JC and have seen both rents and house prices in last few years go up like crazy. I have been looking to buy a Multi family in JC with easy access to NY transportation for the last year and half but no luck as I have been overbid . Prices keep going up and I have had to increase my budget in order to fulfil my dream of buying a 2 family - where I can live in one unit and rent out the other.

I don't have much experience in RE . I recently found a brand new 2 family construction close to Rt 139 which meets my criteria of being close to NY access. Problem is it is priced close to 800K.

At that price point , does it still make sense to get into this market while the rates are still low ?

I am putting close to 25% down so that my monthly mortgage is within reach and does not increase my monthly cost of living . I am currently renting paying close to 2200 for a 3 bedroom

Experts - can you please suggest if this is a wise decision.  Or is it better to wait for an opportunity when the prices dip , even though interest rates might have risen ? ( something I have been hoping for last 2 years with no luck )

Thank you for reading and sharing your thoughts!