New Investor Getting Out Bid
Hey Everyone; I have been saving for some time now to get my first investment property. I am looking for a 2 to 3-family, one unit I can live in and the others I rent out. My goal is to live for free while the other units take up the mortgage. I started out looking during 2020 and 2021, and every time, I am being outbid or the houses do not meet my goals. After seeing the crazy market, I am wondering if my dream of buying a 2 - 3 fam in Newark for 380k is dead. Any advice would be greatly appreciated. Also, I hear that 2023 should be a better market for a buyer, should I just wait out the market?
Thanks
how many offers have you made?
Quote from @Sean Peart:
It has been a tough market, but it should start slowing in 2023. If predictions are correct, we'll see prices drop 10% - 20% from their peak in June 2022. As prices drop, we'll see fewer people cashing out equity on their primary homes and jumping into investments. We can also expect to see sellers panic and accept lower offers. But nobody can predict the future.
I would continue watching the market and analyzing houses. People can buy and make a profit in any market, but some markets are more conducive than others.
Quote from @Nicholas L.:
how many offers have you made?
This. If he was bidding on properties in 2020 and 2021 what did you expect? It was chaos in the streets. RIGHT NOW is good time to buy. Sellers are price dropping everything. We bought a SFH about 4 months ago $15K below ask and well enough below market. That window will close (slightly) when the spring shoppers come back out. Regardless of the Fed policy this year action speaks louder than words.
Hello Sean, I would encourage you to get creative and ask yourself questions to push you in the right direction.
first, there are people in EVERY market making money off of real estate right now, how can you become one of those people? What are they doing that you aren't? What strategies are they using? Is small multifamily house hacking a viable strategy in your market? Could you cash flow using a rent by the room house hack or STR househack where your purchase price should be lower because it is single family? Have you considered partnering with someone to be able to get into higher priced assets? Have you looked at places that need a rehab that would turn off some investors or properties where you could add units by finishing a basement, build an ADU, or convert a garage into an ADU? Have you sought out other investors in the area to see what they are doing? Look for people in your area on BP and offer to buy them a cup of coffee and talk about real estate and start asking questions.
I hope this is helpful!
#2 Starting Out Contributor
- Specialist
- Mendham, NJ
380k can get you a multi in Newark, but it's not going to be a done one unless it's small and in what some may consider to be a less desirable part. What you want is doable, but there is still a ton of competition. What's your financing? Remember if you are using FHA or low-money-down loans to get it, you are up against cash investors in Newark. 203k renovation loan is an option for Newark for sure if you are up for it and can compete with cash investors.
Quote from @Nicholas L.:
how many offers have you made?
in 2020 i made 6 offers
and 2021 i made 5 offer
2022 I made 1 offer
Thanks for the response
I am hoping to go on the hunt again in 2023. But my realtor told me I am getting bid and no one wants FHA. is this true?
I would be active now. I am seeing a slow down currently with it being the Winter time. When it hits March it will ramp up. It shouldn't be nuts but there will be higher competition.
Quote from @Jonathan Greene:
380k can get you a multi in Newark, but it's not going to be a done one unless it's small and in what some may consider to be a less desirable part. What you want is doable, but there is still a ton of competition. What's your financing? Remember if you are using FHA or low-money-down loans to get it, you are up against cash investors in Newark. 203k renovation loan is an option for Newark for sure if you are up for it and can compete with cash investors.
I am using FHA, my realtor told telling me no one wants FHA. Does it make sense to continue looking with FHA?
Quote from @Caleb Brown:
I would be active now. I am seeing a slow down currently with it being the Winter time. When it hits March it will ramp up. It shouldn't be nuts but there will be higher competition.
Okay I am going to start looking again, maybe I will find the deal of a lifetime. It is hard to compete with FHA, I think FHA is a good starter loan because its federal back and low requirements. But due to the sellers refusing FHA should I continue with FHA?
only you and your lender can answer whether you should continue with FHA or look at other options. do you have more to put down?
from a sellers perspective, FHA can indicate a lower likelihood of closing. you can counter this by potentially offering slightly more than a cash buyer if you get into a multiple offer situation. but this is something you'd do in consultation with your realtor and lender.
i would keep making offers. good for you for making so money. most people don't want to put in that work, they want to push the easy button.
@Sean Peart fha is hard to compete against cash and hml investors, to many guidelines with fha and most sellers don't want to deal with the high probability of the loan not going thru. Newark, and much of ny nj areas are heavy with cash investors
Quote from @Jonathan Greene:That's interesting, about 203k loans. Can you point me toward more info on how it competes with cash? Is it just that the lender's evaluation of the property is less strict, so it's more likely to close?
380k can get you a multi in Newark, but it's not going to be a done one unless it's small and in what some may consider to be a less desirable part. What you want is doable, but there is still a ton of competition. What's your financing? Remember if you are using FHA or low-money-down loans to get it, you are up against cash investors in Newark. 203k renovation loan is an option for Newark for sure if you are up for it and can compete with cash investors.
Quote from @DArtagnon Chilcoat:
Quote from @Jonathan Greene:That's interesting, about 203k loans. Can you point me toward more info on how it competes with cash? Is it just that the lender's evaluation of the property is less strict, so it's more likely to close?
380k can get you a multi in Newark, but it's not going to be a done one unless it's small and in what some may consider to be a less desirable part. What you want is doable, but there is still a ton of competition. What's your financing? Remember if you are using FHA or low-money-down loans to get it, you are up against cash investors in Newark. 203k renovation loan is an option for Newark for sure if you are up for it and can compete with cash investors.
At first, i tried to put in minimum FHA but i move up my down payment to 5% my realtor says 5- 10% down would be a good indication to the seller i am seriously interested 203k rehab loan, maybe that's an option find a fixer-upper
#2 Starting Out Contributor
- Specialist
- Mendham, NJ
Quote from @DArtagnon Chilcoat:The factor is habitable or not. Conventional loans can only be done on houses that are habitable, like you can move in and occupy. Also, most conventional require move-in within 60 days now. So if it's not conventional, 203k loans can beat cash because since it's a loan you can pay more than cash buyers and it's already assumed you are doing a rehab job so that is built in to what is needed and expected. Inspections aren't as big a deal with 203k because you are renovating anyway.
Quote from @Jonathan Greene:That's interesting, about 203k loans. Can you point me toward more info on how it competes with cash? Is it just that the lender's evaluation of the property is less strict, so it's more likely to close?
380k can get you a multi in Newark, but it's not going to be a done one unless it's small and in what some may consider to be a less desirable part. What you want is doable, but there is still a ton of competition. What's your financing? Remember if you are using FHA or low-money-down loans to get it, you are up against cash investors in Newark. 203k renovation loan is an option for Newark for sure if you are up for it and can compete with cash investors.
#2 Starting Out Contributor
- Specialist
- Mendham, NJ
Quote from @Sean Peart:You aren't going to win with FHA at 380k for a multi anywhere in Northern NJ. At that price point, most of the multifamily homes will not qualify for FHA loans. To house hack with FHA, you want to be buying something almost turnkey and 380k isn't getting you turnkey unless you go farther out in NJ.
Quote from @Jonathan Greene:
380k can get you a multi in Newark, but it's not going to be a done one unless it's small and in what some may consider to be a less desirable part. What you want is doable, but there is still a ton of competition. What's your financing? Remember if you are using FHA or low-money-down loans to get it, you are up against cash investors in Newark. 203k renovation loan is an option for Newark for sure if you are up for it and can compete with cash investors.
I am using FHA, my realtor told telling me no one wants FHA. Does it make sense to continue looking with FHA?
@Sean Peart That's a lot of offers so don't get discouraged. That's more than we made by a long shot. During that time it was chaos. We couldn't even walk properties before they went pending.
The FHA loan is reaaally hurting you but it's not impossible right now. I'd be hunting for opportunities but come March if you haven't bought something I'd FULL stop searching and get qualified for a conventional loan. Hopefully you're moving towards that goal.