New Investor! (Not in Jersey City...)
Hey everyone!
Brand spanking new investor here. Deep in the corporate rat race with no means of free time and/or meaningful wealth generation. I'm also the owner of my photography business with early aspirations to transition fully into it, but never gained real traction.
I found REI and Bigger Pockets while youtube surfing random stuff. Went deeper into the REI hole and started reading books (Rich Dad Poor Dad, Rental Property Investing (Brandon Turner), and BRRRR (David Greene) and listened to podcasts/youtube videos. Needless to say I'm hooked on making this work. Here's my stats:
- I'm located in Howell, NJ. The post location says "Jersey City", but that's incorrect and there were only 2 options to choose from (why?).
- I'm looking to invest ideally in Single or Multi family properties in Central/South NJ. Reason being is I don't have an investment property yet, and I don't want to try remote investing until I can get comfortable with the process. I'm open to the surrounding states of PA and DE, assuming the NJ isn't as lucrative or other reasons.
- My REI goal is to build passive income and generational wealth. I've decided on the "BRRRR" strategy.
- My goal with BP is to learn more, network, build a team, and get started within the next 6 months.
- Fun fact about myself: I think chocolate mint anything should be banned as a food option.
Look forward to learning more.
@Roland Manlapig the BRRR strategy is a great investing strategy, but it takes a lot of experience. If you are not familiar with large scale construction projects and real estate investing in general its a good way to lose a lot of money quickly.
You need to be able to work the numbers all the way through. You have to get the right sale price, estimate your construction costs within a margin of error, properly account for all of your soft costs, hit your After repair value target, and then hit your rental figures when the project is done.
Every single one of those line items impacts the next line item. If you pay too much for the house you will have less for your renovation budget, which leads to under renovating rentals, which leads to being below market on rental rates. This can also impact the after repair value. IN addition to all of the flowing numbers on a BRRR you have market conditions to worry about as well.
Some people have a natural understanding of construction and business and can pull this off, most people end up missing on one of the target goals.
Be very wary of contractors who can do the job quickly and for 65% of cost of everyone else.
@Roland Manlapig
Have you looked into a house hack? Buy a 2-4 unit with an owner-occupant loan which is typically 3.5-5% down as long as you occupy the property and then rent the other units out to cover the mortgage. It's a great way to get started in real estate.
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Quote from @Matthew Irish-Jones:
@Roland Manlapig the BRRR strategy is a great investing strategy, but it takes a lot of experience. If you are not familiar with large scale construction projects and real estate investing in general its a good way to lose a lot of money quickly.
You need to be able to work the numbers all the way through. You have to get the right sale price, estimate your construction costs within a margin of error, properly account for all of your soft costs, hit your After repair value target, and then hit your rental figures when the project is done.
Every single one of those line items impacts the next line item. If you pay too much for the house you will have less for your renovation budget, which leads to under renovating rentals, which leads to being below market on rental rates. This can also impact the after repair value. IN addition to all of the flowing numbers on a BRRR you have market conditions to worry about as well.
Some people have a natural understanding of construction and business and can pull this off, most people end up missing on one of the target goals.
Be very wary of contractors who can do the job quickly and for 65% of cost of everyone else.
Hey Matthew, thanks for the insight and advice. I plan on doing more research with numbers and setting up case studies. But as with anything nothing is a better teacher than experiencing it.
I initially plan to get a distressed property that would require light rehab and work my way to heavier rehabs after. Equity/margins will be slim, but figure it'd be a good place to start?
Quote from @Patrick Drury:
@Roland Manlapig
Have you looked into a house hack? Buy a 2-4 unit with an owner-occupant loan which is typically 3.5-5% down as long as you occupy the property and then rent the other units out to cover the mortgage. It's a great way to get started in real estate.
Patrick, Thanks for responding.
House hacking unfortunately isn't an option for me. Married with kids and don't want to uproot every year.
My initial plan is to get a light rehab, rent out, and then go from there.
Welcome to BP Roland and good luck investing!
@Roland Manlapig investing in sub optimal markets is not a good way to "get comfortable" with the process. Depending on your objectives, all you may be doing is setting yourself up for failure from the very start. NJ has some of the highest property taxes in the nation and is extremely tenant friendly. It's not an ideal market for buy and hold. As far as PA and DE. PA is more landlord friendly than NJ but also has higher than average property taxes. You'd have to see how the numbers work out and whether you can still cash flow because of that. DE has relatively low property taxes but is not landlord friendly. If you're going to invest outside of your local market, you might as well pick a market that is the most optimal. You might want to consider some of the Midwest markets.
Quote from @Mike D'Arrigo:
@Roland Manlapig investing in sub optimal markets is not a good way to "get comfortable" with the process. Depending on your objectives, all you may be doing is setting yourself up for failure from the very start. NJ has some of the highest property taxes in the nation and is extremely tenant friendly. It's not an ideal market for buy and hold. As far as PA and DE. PA is more landlord friendly than NJ but also has higher than average property taxes. You'd have to see how the numbers work out and whether you can still cash flow because of that. DE has relatively low property taxes but is not landlord friendly. If you're going to invest outside of your local market, you might as well pick a market that is the most optimal. You might want to consider some of the Midwest markets.
Mike, thanks for responding. Maybe I need to reevaluate where to look for properties. I'll have to do more research into more optimal markets.
@Roland Manlapig if you're going to go outside of your local market then the sky is the limit. Choose the very best market that you can.
Welcome to BiggerPockets, Roland!
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