All Forum Posts by: Ryan Goldfarb

@Anthony Caleca

Do you have taxes and insurance factored in there? I didn't see them broken out, but maybe they're embedded in one of the other expenses.

As for East Orange, big factor here is where within EO the property is located. There's no substitute for driving the area and learning it block by block.

Also, double check their rent control ordinance. I can't remember if it kicks in for 4-unit buildings or 5-unit buildings.

Hey, @Eric S. - welcome! 

I'm in JC as well. We've been investing here for a bit; I'd be happy to grab coffee or a beer and chat.

@Jordan Gregg

Welcome, @Joshua Jones!

Congrats at getting in on the Union City frenzy early on. Sounds like your spot is in a great location.

Focus is key, but you can only focus once you know what you're after.

If you're seeking to maximize cashflow, you'll be targeting different areas than if you're seeking long-term appreciation, which can be a risky proposition depending on the location and current cashflow.

For example, on paper, returns in riskier markets will appear higher from a cashflow standpoint (think  rougher sections of Newark, East Orange, etc.). However, those investments will carry more risk and are [generally] more management intensive. Not always recommended for rookies.

On the flip side, investing in more desirable areas of Hudson County may lack the cashflow that other markets can provide, but for a variety of reasons, you may feel safer investing there. You may forecast greater appreciation; you may prefer the proximity to the city; you may prefer that tenant base; or, you may prefer to invest closer to where you live. 

Happy to discuss further, and best of luck!

Hey @Jordan H. - always down for a beer, too. Good to have you on board.

Hey @Ryan Cheung, two things:

First of all, great name. 

Secondly, my brother is a Realtor based in Hoboken. He's intimately familiar with Hudson County and knows the investing side as well as he invests alongside me. He's worked with a number of clients in your position. Feel free to reach out; I'd be happy to put you two in touch.

Best,

Ryan

@Julie Verardi - depending on your existing financing, the loan docs may prohibit transferring the deed. Or it may trigger the due on sale clause, in which case the bank could call the note due. Not a likely scenario, but consult your attorney.

In terms of transferring the property over, you'd likely be filing a quitclaim deed to transfer ownership from your name to the LLC. In addition to consulting your attorney, discuss with your accountant as well as there may be additional ramifications depending on how you're filing.

An LLC may only provide additional protection if it's structure correctly, but it also limits your financing options as some investment loan products are only offered to individuals. In addition, I don't know that an LLC automatically protects you just by holding the property. Again, consult an attorney.

@Bing Lin -- happy to connect you with my brother as well. He's based in the area and invests with me in Jersey City. Feel free to shoot me a PM if you'd like an intro. Good luck!

The Heights has been booming over the past few years as buyers are priced out of downtown JC and Hoboken. There's still a price difference between The Heights and DTJC/Hoboken, but it's less significant than it used to be.

I saw a 2-family new construction hit the market this week for $1.2MM, which is insane. I'm a big fan of the area, but prices have gotten scary to the point where it's tough to make the numbers work on anything that hits the MLS.

@Vik Nirwal -- @Jordan Gregg and @Account Closed are right; the numbers are pretty tight on this one. A few observations:

1. Regarding vacancy, no matter how desirable your property and location are, you'll always experience some degree of vacancy. Even if you're going to be very aggressive in your underwriting, consider something like a 4% economic vacancy factor. Tenants will inevitably move out due to varying circumstances that are often out of your control. If your tenant's lease expires on Jan. 31st, there will be a period of time during which you will not be collecting rent due to cleaning up the apt., painting/touch-ups, and finding a new tenant. 4% vacancy equates to about 15 days, so if you do everything right and find a tenant ready to move in Feb. 15th, that eats up your vacancy allowance right there. Keep in mind, things can still go in either direction -- your tenant may elect to renew his/her lease, in which case your vacancy amounts to 0% that year. Or, there's a delay in bringing in a new tenant, and a new tenant doesn't move in until March 1st, which amounts to just above an 8% economic vacancy. (Keep in mind, there are also expenses associated with turning over the unit to a new tenant, like cleaning, painting, replacing toilet seats, patching holes, etc.)
2. Rent growth - consider this the cherry on top of your projected cash flow, but history suggests, especially around here, that you'll realize some degree of rent growth. Even at 2-3% per year, that will add up once you reach Year 5 or Year 10.
3. Down Payment - As a baseline, you should always analyze a deal exclusive of your own financing, as that's how [most] other investors will analyze the deal. A deal shouldn't look "better" to you because you're putting 20-25% down. Remember that this is $200k you won't have to invest in the "next" deal. Opportunity cost.
4. Quality of Life/Renting vs. Owning - On the flip side, there's definitely something to be said for owning a property and paying into a mortgage vs. rent. There's the quality of life associated with owning (both positive and negative) in addition to the financial ramifications. Consult your account to see how owning your home will impact your tax position based on the mortgage interest tax deduction, depreciation, and your ability to write-off certain expenses. Along those same lines, consider the value of eliminating your rent payment every month. While these factors shouldn't inform your decision on whether or not a deal is a good deal, it's certainly worth evaluating in determining whether to buy or to continue renting.
5. Capex - Jordan is spot on with this. Even with a brand new building, capex is inevitable at some point. Every component as an "estimated useful life". Based on projected costs, you may find this article helpful in gauging how much to set aside over the long haul.

I acknowledge that it's tempting to lock in debt at today's favorable terms. I've even heard investors on the BP Podcast state that their goal is specifically to obtain $x,xxx,xxx in new debt. But that only makes sense if the deal can support it. It's okay to get excited about the upside, but only once you understand the downside.