Metuchen, NJ · Member since 2017 · 14 posts · 2 votes
Hey guys,
I am new to real estate investing but have been doing my research on how to get started. I am in my early 20s but want to get started as soon as possible. I had 2 questions which I could use some advice on please!
1. Are turn-key investments good for a first time investor? Keeping in mind that I am fresh out of college and have about 20k saved up so far.
2. Living in the NJ area. Does it seem more advantageous to start in the NJ area so it's in close proximity? My only concern here is the exorbitant property taxes. Many people have said Multi Family Homes are the way to go in NJ. What's your take?
I am willing to spend 50-60k on my first investment.
Appreciate any advice!
Thanks!
Union City, NJ · Member since 2014 · 7 posts · 10 votes
9y
I live in Hudson county and househacked for my 1st deal. prices and taxes are ridiculous here. I'm 4 years into it and could never imagine paying taxes and maintenance on a place anywhere in NJ burbs without having rent coming in to subsidize it.
That said, I still pay about $1k/mo out of pocket(including utilities for the building) to live in my 3 family BUT that same 1k is the exact amount of principal reduction per month. So just moving it from short term pocket to long term pocket.
Living in this subsidized way has essentially thrown rocket fuel onto my long term savings and how much I can,set aside for the next deal, brokerage acct, and 401k. Only $1k out of pocket/ month (but not really since I'm paying down principal) is a steal I'm Hudson county where I watch my friends that have condos in Hoboken pay 4-5k per month only to pay down less than $1k in principal monthly. All those extra thousands I'm not paying are going to my savings.
That said, I've had hiccups and major major expenses in the 10s of thousands. and it's practically impossible to find a decent reliable contractor. although so eager to get into another deal and expand, after 4 years of experience with (great) tenants, unexpected issues & costs, while not ramping up as fast as I want, it's been fantastic learning and key is hands on experience with management and on exactly what goes wrong and what you have to deal with and hands on management
I am new to real estate investing but have been doing my research on how to get started. I am in my early 20s but want to get started as soon as possible. I had 2 questions which I could use some advice on please!
1. Are turn-key investments good for a first time investor? Keeping in mind that I am fresh out of college and have about 20k saved up so far.
2. Living in the NJ area. Does it seem more advantageous to start in the NJ area so it's in close proximity? My only concern here is the exorbitant property taxes. Many people have said Multi Family Homes are the way to go in NJ. What's your take?
I am willing to spend 50-60k on my first investment.
Appreciate any advice!
Thanks!
Are you only looking in NJ? I only ask because with Turnkeys you can invest in many different markets around the country where you might be able to find better ROIs.
Metuchen, NJ · Member since 2017 · 14 posts · 2 votes
9y
Hey Tom Ott
No not looking for turnkeys in NJ area. I was maybe thinking of a house hacking strategy in the NJ area in a multi family home versus investing in turnkey away from NJ. Thinking about what would be better as a first time investment.
No not looking for turnkeys in NJ area. I was maybe thinking of a house hacking strategy in the NJ area in a multi family home versus investing in turnkey away from NJ. Thinking about what would be better as a first time investment.
House hacking can be a a great way as well. You get an FHA loan.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
9y
Bhavik Patel I'm also fresh out of college and am currently in the process of buying my first turnkey, out of state. If you have any questions, please just Pm me. Total cost for my purchase will be about 20k
Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
9y
@Bhavik Patel I'm a fellow New Jerseyan and personally think that house hacking is the way to go. Everyone needs a place to live and being able to have a tenant subsidize your mortgage (if not pay for the whole thing) would be a very smart way to start your investing career. You'll be able to gain relevant industry knowledge while being able to save more due to reducing your current housing costs.
I might be wrong here but I just feel like buying a turn-key property in another state could be a disservice to you unless you're looking for a fully passive investment.
Union City, NJ · Member since 2014 · 7 posts · 10 votes
9y
I live in Hudson county and househacked for my 1st deal. prices and taxes are ridiculous here. I'm 4 years into it and could never imagine paying taxes and maintenance on a place anywhere in NJ burbs without having rent coming in to subsidize it.
That said, I still pay about $1k/mo out of pocket(including utilities for the building) to live in my 3 family BUT that same 1k is the exact amount of principal reduction per month. So just moving it from short term pocket to long term pocket.
Living in this subsidized way has essentially thrown rocket fuel onto my long term savings and how much I can,set aside for the next deal, brokerage acct, and 401k. Only $1k out of pocket/ month (but not really since I'm paying down principal) is a steal I'm Hudson county where I watch my friends that have condos in Hoboken pay 4-5k per month only to pay down less than $1k in principal monthly. All those extra thousands I'm not paying are going to my savings.
That said, I've had hiccups and major major expenses in the 10s of thousands. and it's practically impossible to find a decent reliable contractor. although so eager to get into another deal and expand, after 4 years of experience with (great) tenants, unexpected issues & costs, while not ramping up as fast as I want, it's been fantastic learning and key is hands on experience with management and on exactly what goes wrong and what you have to deal with and hands on management
Union City, NJ · Member since 2014 · 7 posts · 10 votes
9y
Sorry on my cell. hit submit incorrectly.
Anyway I'm in a better position now to expand after years of on the job training both knowledge wise and financially than I was when I bought this place 4 years ago. and from the comfort of my own home without having to drive all over town to deal with repairs or shoveling or site check ins. For a newbie in a high cost state I think hacking is,the way to go. you don't realize how much time it actually takes to deal with all aspects of management and maintenance, so why not at least benefit directly from all that work by living there too? because you'd have to do it anyway where ever you live
Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
9y
@Cory Lehnbeuter Is it save to say that when/if you eventually go to move out that you'll end up cash flowing with this property due to the high rents in your area?
Attorney · Rutherford, NJ · Member since 2015 · 132 posts · 168 votes
9y
Hey @Bhavik Patel welcome! My 2 cents are, like others here, that house hacking is the way to go when you're starting out. This is how we started out in Union City (not knowing that the term was called house hacking): we bought a 2 family, lived in one unit, and rented the other unit out. At the time, the rent from the unit we weren't living in covered something like 75-80% of carrying cost for the entire house (we were able to get a great deal, this is in like late 2013/early 2014). Like @Cory Lehnbeuter we used the savings from that to buy a second house, etc. and now we have a good number of smaller multifamilies mostly in the Union City area. The advantage to living near where you are is that you can manage the property yourself (assuming you have time), and you'll also learn first hand about property maintenance, finding and maintaining tenants, and so on.
My inclination is that you're going to be paying quite a premium for a turn-key ready property anywhere in Hudson County/northern New Jersey. Although I agree that it can be daunting to consider a renovation project as your first house, the fact is that some of the homes in the area (certainly there are a lot of exceptions) are not in absolutely terrible shape, more so that they just haven't been updated in the past 30 years. I think it's always easy to work with a home that no one has updated in the past 30 years (assuming whoever last worked on it did a good job!) versus one where someone has renovated it within the past ~10 years, but done a really bad job. So don't let things like ugly floors/carpet, old/bad/crazy paint, old kitchens, old bathrooms, etc. deter you. I'd be much more concerned about things like crumbling foundations, buried underground oil tanks, weird/illegal/collapsing extensions, etc. Even things like a roof needling to be replaced or old boilers can be factored into the renovation costs.
In general, I think the cost of taxes is factored into the price you'll pay for the property and the rents you'll receive. It's not as though cash flow in the area is stunted because taxes are high: I think you can look anywhere around the NYC area (which has a hugely varying property tax structure) and see that the cost of property adjusts largely relative to the property taxes assessed on it.
Best of luck! Feel free to PM me if you'd like to grab coffee or lunch in the area!
Union City, NJ · Member since 2014 · 7 posts · 10 votes
9y
@Christopher Giannino
Yes, this would be cashflow positive today if we rented out our basement apartment (which we do sometimes on airbnb) which we use for our own use for family and friends to visit. It was rented when we bought it but we didn't necessarily need the $ as much as the space. I expect to hold the building if we ever move and it would easily get $3k/mo positive cashflow (not including reserves/capital improvements) with today's comps not including about $150/mo from parking spot rental in driveway. Parking / garages seem appealing to me in this area. I get people from bus stop asking all the time and currently rent 1 spot to a friend. Maybe next deal just parking garage for low maintenance.
Another option as well is out of state investing, specifically buy and holds. As someone who lives in New York, I ran into the same problems you are having; prices. Your money does go a lot further once you invest in other states.
Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
9y
Yes, that's what I thought you were going to say @Cory Lehnbeuter. Congrats, sounds like a gem! @Bhavik Patel Cory's example is great because it shows that at higher price points, you can still make a house hack work.
Investor · Brooklyn, NY · Member since 2016 · 55 posts · 38 votes
9y
As people mentioned, the best option would be to house hack. That being said, if you want to get a reasonably priced multi-family in a good area around Northern NJ it won't be easy and your return on your investment will be significantly lower. Even if you do get an FHA loan on a house that's in higher priced area it will take a long time to regain enough equity to refinance a house (assuming you will not use other sources of income to pay down the mortgage faster). If you're willing to move to a place where prices of houses are not as crazy it might work better. So unless you are willing to move I would first invest in a Turn Key. I am myself from NYC and prefer Turn Key properties in Central NJ because you can get a house from $50K - $80K which rents from $1,100 - $1,400. So assuming you get a traditional loan 4.5% fixed interest you will end up with around $400 - $500 net income every month after all expenses including mortgage is paid. Once you have enough equity in a house which is not that difficult for a $60K house you can refi and get another similar property also netting $400 - $500 a month and you repeat this process.
As far as investing within your proximity. I would say it's an absolute must to invest in an area not farther than 1 - 1 1/2 hours away. You want to have some control over the property in case something goes wrong and be on top of the situation, so it's important to invest something within your proximity. Both Single Family and Multi-Families have their own advantages and disadvantages. Single Families have more exit strategies but are assessed based of the house value. Multi-Families are good because their assessed value is usually based of their income but it carries more responsibility like the landlord is responsible for more things such as moving grass in front yard, sewer and water, and lights in hallway area etc... So each has their strengths and weaknesses. Hope this helped. If you have any questions about which areas in NJ I invest in or anything else feel free to contact me.
Whether you start in Jersey or not should depend more on the numbers and the opportunities. Most areas of Jersey won't cash flow well. Trenton had a run for a while, but not sure how it is now.
Philly and Baltimore are both half-nearby. Thought of either of those?
Metuchen, NJ · Member since 2017 · 14 posts · 2 votes
9y
Hey Ali Boone
You are right and as many others have said, NJ is a tough place for turnkey properties for various reasons.
To answer your question, I was actually looking into the philly market and found one TK company by the name of Turn Key Philly. Still doing research on this company. Do you have any tips for either the Philly or Baltimore area? Or know of any reputable TK companies that I should consider?
Thanks!
Metuchen, NJ · Member since 2017 · 14 posts · 2 votes
9y
Ali Boone
Also, what are you thoughts on turnkey investments in Cleveland and Memphis? I have been looking into these cities as well. I understand that these are long distance which would be a legitimate concern as a newbie I assume.
Bhavik Patel I'm also fresh out of college and am currently in the process of buying my first turnkey, out of state. If you have any questions, please just Pm me. Total cost for my purchase will be about 20k
Hi Caleb, sorry if i posted twice, I'm new to BP.
Do you mind me asking where you invested 20K in. Market and TKP?
Real Estate Investor · Montclair, NJ · Member since 2015 · 102 posts · 13 votes
9y
@Bhavik Patel, I recommend that you find a mentor(s) within 1 hour of your home if possible then learn while you earn. Additionally, get involved not only with local real estate clubs but find clubs that educate and share with topics that meet your interest and concerns. At some point you'll have to decide whether this will be part time or a full time commitment for you. No worries, your income will help with that decision sooner rather than later #Winners Win #Go Make it Happen
Investor · Wyckoff, NJ · Member since 2015 · 100 posts · 35 votes
9y
@Bhavik Patel, I think many here have already offered sound advice.
Speaking from my personal experience, I house-hacked my first property and it was a great way to get started. I've never purchased a TK, but I have sold them to other investors and continue to manage some on their behalf. NJ is a tough market but there are still cash flowing properties out there, sometimes you just have to look really hard.
You can be successful with whatever strategy you ultimately deploy, it depends largely on your comfort levels.
I am new to real estate investing but have been doing my research on how to get started. I am in my early 20s but want to get started as soon as possible. I had 2 questions which I could use some advice on please!
1. Are turn-key investments good for a first time investor? Keeping in mind that I am fresh out of college and have about 20k saved up so far.
2. Living in the NJ area. Does it seem more advantageous to start in the NJ area so it's in close proximity? My only concern here is the exorbitant property taxes. Many people have said Multi Family Homes are the way to go in NJ. What's your take?
I am willing to spend 50-60k on my first investment.
Appreciate any advice!
Thanks!
The turnkey product is for the arm chair investor. You are both buying a service and investing. It will cost you a bit more but you don't have to do the dirty work. It's like going out to a restaurant vs cooking at home.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
9y
Heya. Well the distance part I'm not against, but I'm not personally an advocate of Memphis or Cleveland as markets to buy in, for several reasons. Happy to talk about those in detail if you want. I do have some connections in Philly and Baltimore but they currently are only doing all-cash only deals in a BRRRR type of fashion. Tons of benefit to doing it this way, but limiting for budgets and such. Can send you more info if you're interested. Can also give you info on other markets as well. Message me anytime.
Real Estate Agent · Fort Collins, CO · Member since 2016 · 246 posts · 142 votes
9y
Hey @Bhavik Patel in regards to question #1, I think it depends on the market you are in. I had initially planned on investing where I lived. After months of making offers and bidding wars and such in Colorado I began to research TK and I landed on Memphis. So while I continued making offers in CO, I connected with a TKP, renovated a house in Memphis and got it rented out...all before I finally closed on my rental in CO. So if you live in an area that's getting great returns I think it's a no brainer to invest there but places like CO or CA, I would consider TK.