wesbc said:Getting ready to jump in on my first investment property. Reading up the post on this thread, but there's alot.

Here's what I'm currently looking at. A 4 unit apartment building that's setup like an apartment vs some of the odd houses that I've seen with several unit. Asking price is $470k but I figure if I can get approx $1k - $1.2k I should be in good shape. Property tax is $10k, sucks to be in NJ. I'm not sure what I'll be looking at with insurance / mortgate rate.

One other thing, my current home I have about $20k left to pay off. I was going to sell some stock for my investment property but was also thinking of paying off my existing loan on my house. That way I don't have a current loan I have to pay and in the event of any un-forseen issue with the investment property, I won't be in some financial bind. What are your thoughts?

Also, anyone in NJ, or in CNJ for that matter with experiences that they would like to share?

Thanks and I'll be doing a lot more reading trying to catch up. Being that this thread is now 8yrs old, I'm curious to hear how folks have done with their investment with this crazy roller coaster that is call real estate investment.

NJ is pretty wide spectrum of geography and rents....

Can you narrow it down more on which metro-area and what your research shows 'market rate' rent to be for each of those 4 units?

I used to own properties in NJ (while in grad school), and bought only houses walkable to NJ Transit stations (Iselin, Edison primarily). Quite easy to rent, and hardly ever had vacancies. Most tenants were either students or young pros from India or China who work in the city, and wanted a cheap but safe and convenient place to live and commute. When I left NJ I had tenants/neighbors all trying to buy (so I sold them without agents in 1 week).

Getting $1-1.2K/month/unit from a 4 unit? And covering $10K taxes (and still going up) + mortgage + insurance + maintenance + vacancies + non or late paying tenants? Hmmmm, looks more like an impending cash flow problem. You might have a + cash flow if you put a lot down, but with interest rate low (and housing market uncertain), not a good idea to put too much skin in the game.

My suggestion is to buy 1 or 2 old houses and get your feet wet first. Use this experience to learn how to find and buy properties that is right for you and your tenants. And learn how to generate + cash flow. Once you are more experienced you can always move up to larger units using your + cash flow from earlier properties.

One more thing, if you can get a bank to lend you money (at good rate and not a lot down right now) on an investment property, that usually means you got a potential winner. So might not be a bad idea to use them for a sniff test before you buy.

If it's East Brunswick than it might be good investment (great school, near Princeton, New Brunswick, Parkway, Turnpikes and highways), and the area's houses are not cheap (due to lot size restrictions and high income levels). But with things so uncertain it's just more prudent to buy knowing you can stomach all possible downsides for an extended period of time (meaning, you can pay the mortgage, insurance, taxes, upkeep, etc.). I suggested Iselin or Edison because they can be purchased a lot cheaper, and they are ideal/desirable for the city commuting crowd, but these probably won't appreciate as much as East Brunswick would, if economy is good again.

Your reasoning for 4-plex vs. single family is sound, but only if you are comfortable with the higher mortgage/tax/burdens. You may consider living in 1 or 2 of those units, and rent out the rest, and rent out your current house. You (+ family) might not be as comfortable, but you will probably make enough (doing this) to buy more properties later.

Since so many NJ area older homes are cape cods (or single story with full basement), you can possibly make them mother-daughter units (undocumented duplexes). If you don't, don't be surprised if your tenants do the same (becoming a 2nd landlord). One thing I learned while in NJ is resourcefulness. Good luck..

MariahJ said:wesbc said:Getting ready to jump in on my first investment property. Reading up the post on this thread, but there's alot.

Here's what I'm currently looking at. A 4 unit apartment building that's setup like an apartment vs some of the odd houses that I've seen with several unit. Asking price is $470k but I figure if I can get approx $1k - $1.2k I should be in good shape. Property tax is $10k, sucks to be in NJ. I'm not sure what I'll be looking at with insurance / mortgate rate.


How is that in good shape when your monthly property taxes are almost as much as the rent? $833/month in taxes leaves $167/month to pay a $400K mortgage, insurance, maintenance, vacancy, and repairs??? I hope you mean $1K-$1.2K per unit, which seems very high, and even that is probably not good enough with those taxes. Based on the 1% rule, you should get at least $4,700 in rent and that's if the tenants pay all of their own utilities. The higher then number of units, the more cash flow you demand. I won't consider anything less than 1.5% on a 4-unit, and my property taxes are a whole lot lower. It sounds like you're setting yourself up for negative cash flow.

Sorry, should have clairfy that it's $1K - $1.2K per unit. From what I can find so far, currently 3 of the unit is rented at $1K and they pay their on utility other then water / tax.

Property tax is a definite minus here in NJ and it makes it tough to find profitiable property along with some of the home price being so high.
Right now I need to find out is what kind of mortgage rate am I looking at since I'm not familiar with investment property mortgage. I have very good credit without much left on my existing loan and only 1 car loan that is less then $6K. Along with how much insurance a property like this would cost.

Another question, with single family house or duplex that have a yard. How do others go about with the up keep? Pay someone weekly to take care of your property, or offer rent discount to the tennant that takes care of it?

Thanks again for the input. I'm still in the gathering phase to learn as much as possible before I make any leap. Being in NJ and along with the state of the economy, I think I'll be lucky just to break even or maybe just a little bit of cash flow. Would love to hear of anyone else in the area that is doing well.

bbr said:wesbc said:

Another question, with single family house or duplex that have a yard. How do others go about with the up keep? Pay someone weekly to take care of your property, or offer rent discount to the tennant that takes care of it?



For a single house, the tenant is responsible for upkeep, no discount. I will arrange upkeep for additional fee (no one has taken me up on this yet). For duplex or more, I pay for yard service. I do have 1 single family house where the homeowners association pays for yard service for the entire neighborhood (designed as a student neighborhood). So for that house, the monthly homeowners association fees are included in the rent.

Good to know, thanks. For those where the tenant is responsible, do you supply them with say a lawnmower or any other tools, or are those the responsbility of the tenant.

Whatever you supply you are also responsible if they break down (appliances, lawn mowers, etc.). So think twice before supplying anything.

Hate to burst your bubble, but for first property do repairs, remodel, cleaning, yards, etc. yourself if you can to save money, and learn your true costs of carrying that property (plus you won't get ripped off by electricians, plumbers, etc.). Work now so it will pay later (and you can play later).

Great attitude, good luck finding your first hen.

solarUS said:JaxFL said:maxrevs said:I have a situation to ask you guys. I have second home that I(was so stupid) bought in feb. 08 at $350K near the plant(airplane maker). Since then price had dropped to $280k and still..have not seen the end of the bottom. Property tax is up 6% since I bought the house. I have renter in the house right now that is paying $1450. My mortgage with tax and insurance is $1500. I originally bought this house(like everyone else) thought that house would go up in value. I had put down $70K so I still owe $280K. House is appraised for $300K last week. There is a house next door listing for $280K for months now...no bite. I bought the house w/tenant in it.

Questions:
Should I get rid of the house at the price that will sell?
What should I do when the lease w/tenant runs out (2/2010)?
What should I do, if anything?

You have to ask yourself: Why do I own this property at this time? Any reasonable answers? Probably not. You have lost your money. Short Sell the place and be done with it. It takes a very long time of appreciation, to which there currently isn't any, in which you will regain your losses. It would take you 12 yrs at 3% appreciation to be back at 350k. Just like when the stock market goes down, people think they will regain what they lost $$ wise. Fools game. I would wait until you renew yr lease with tenants before you attempt to sell as it may take some time. Price it 5% below market, as people are likely to low ball anyways. When it sells you may need to offer your tenants some expenses for breaking lease and moving.
i disagree completely. JaxFL is often on-point, but not here. losing $50/month (probably without factoring in mortgage paydown and tax breaks) versus giving up $70k outright is completely ridiculous. it would take a LONG time with $50 monthly losses to get to $70k...and likely that 70k deficit will decrease over time (unless one expects more depreciation) making a hold decision that much more sound.

The OP purchased it as an investment, in anticipation of appreciation, which hasn't happened. The market, in general, is continuing to decline, as stated by the OP. While you mention the factors of mortgage paydown and tax breaks, you and I both know that any repairs and vacancy will exacerbate the negative cash flow of the property. That I believe should be a greater consideration, it certainly would be monetarily, and is counter to the benefits of the mortgage pay down/tax write off benefits.

The original reason for purchasing the property is no longer valid or a reality. Ultimately the OP needs to not only answer the initial probing question but also ask: Do I want to own and deal with this property over the next decade (Assuming OP doesn't pay pay for management). The tenuous situations that are prevalent currently result in more reasons not to own than own. OPs time and energy (mental/physical) weigh heavily in the answer. Other details not provided certainly factor in as well.

solarUS said:
obviously the OP's comment of "have not seen the bottom" is pure speculation, and doesnt belong in a cost analysis.

rental investments make money regardless of whether or not they appreciate (in a normal market...you cant plan for depreciation), so i am confused by your comment that suggests a singular source of ROI.

mortgage paydown can be a considerable amount - if a place is relatively new construction, the repair bills are generally low. if you can do your own, then even lower obviously.

here's the only real question, when it comes to deciding if keeping the place makes real fiscal sense: would YOU pay $50/mo and deal with some minor hassles for $70k? i would. if a person doesnt want any hassles, then perhaps a lease-option scenario would be ideal.

The OP's purchase price and payment would suggest a long term loan, which with a newly purchased home, would not provide much in the way of mortgage paydown. Certainly any vacancy or repairs would offset such benefit on a new long term loan, esp in conjunction with an existing monthly loss. I'm not disputing your overall multiple source thoughts, but I don't believe they apply in the OP's circumstances, to which I was responding.

I believe the market to be in a downward/flat trend. There are a lot of adjustable mortgages, as well as adj. mortgages yet to adjust, poor general economic/currency conditions, many vacant foreclosed homes that are sitting idle, as the banks/Govt doesn't want to flood the market.... Pluses may be inflation (if people can afford increased rent), population growth (provided they have employment), fixed rate mortgages are low interest rate (paying in future dollars).

To give perspective, I stated that it would take an AVG. appreciation of 3% over 12 yrs, to recoup. Obviously there will be good yrs and bad yrs on appreciation, vacancies, and repairs (Carpet and Paint), rental rates. If you consider this a money maker and would be willing to loose $50 per month then its sounds like you should take over the OP's property and payments. An anticipated 12 yrs is a long time. Not a situation I would want to find myself, even though I do own a property with similar circumstances.

Sheriff sales are typically cash purchases...if you don't have 20%, I'm not sure how you are going to buy.