Newbie from Moonachie in Northern New Jersey

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Newbie from Moonachie in Northern New Jersey

Sunny Burns
Rental Property Investor · Mine Hill, NJ · Member since 2014 · 229 posts · 396 votes

Hello Biggerpockets Community! I’ve been listening to the BiggerPockets Podcasts for a little over a year now, and feel like it’s about time I interact on the forums and introduce myself. I am a recent college graduate of Stevens Institute of Technology and am now working full-time as a Mechanical Engineer at Picatinny Arsenal. I am very happily married to a wonderful elementary art teacher. We are both very interested in getting an early start towards our goal of financial freedom. We both like the idea of becoming buy and hold investors. Our goal is to buy a 3 or 4 multi-family property along RT.80 in North NJ by the spring. We are both smart with our finances and very good at living below our means. We’ve paid off our student loans, have no car payments, and live on the second floor of my parents house(We pay them rent and get along great). I feel we have finally saved enough to put 20% on our first Real Estate Investment Property. I am currently shopping around for a pre-approval, I think I will end up going with my Credit Union.

We both have no real-estate experience, but in preparation we have been listening to the biggerpockets podcasts on our commutes to work and have thus far read/reading:

-BiggerPockets Ultimate Beginners Guide

-ABC’s of Real Estate Investing

-The Richest Man in Babylon

-Millionaire Next Door

-Bigger Pockets Rewind

-Investing in Duplexes, Triplexes & Quads

-What Every Real Estate Investor Needs to Know about Cashflow

-NJ State’s “Buying a Home” guide(Great reading for a first-time home buyer) 

And although I have no Real-Estate Experience, I do have some similar experience since I used to buy and sell cars to put myself through college. I made my initial investment capital by working nights at Taco-Bell; The day I quit, I bought my first car - a 1999 Mitsubishi Mirage, it took a month to flip it, but I more than doubled my initial investment. I went on to sell 18 more cars during my college years. I would buy low, and learn to fix what I could through watching youtube. I graduated in 5 years with a bachelors and masters, and minimal student loans. Because of this experience, I feel strongly that my Wife and I will do very well in the field of Real Estate Investing. I hope to get to know and learn from the seasoned investors in the area. We are interested in joining in on any local meet-ups in the area. Thanks for reading, I hope I don’t sound too boastful, I just want to let people know that I am a serious investor. Based on everything I have said, what next steps should we take before buying an Investment Property?

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Shawn McenteerBusiness Member
Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
11y

@Sunny Burns in most cases my personal opinion is go with the 30 year mortgage because you can always pay it off faster if you desire.  With a 15 year mortgage you will have to pay more each month regardless so it may add extra pressure that is not needed. I understand what you are saying about getting lower rates but that is something that does not bother me so much because you will be using other peoples money to pay off the unit.  Long term you will make more money if you can get a second property faster.  i.e. 

scenerio:

A. 20% down  you now have to start from zero to save up another 20-25% for property number two. 2-4 years of saving? 

b. 10% or less and you save up for property number 2 at an excelled rate, 1-2 years of saving.

Run all the options with your lender to see what works best. Most of the time PMI is your main worry, which can be avoided/reduced with less then 20%. In my opinion it is in most investors best interest to put as little down as possible and let our tenants handle the mortgage while we find new and creative ways to buy more unites.

973-975-3895
House Hacking New Jersey563 Reviews
WebsiteView Page
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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    11y

    @Sunny Burns 

    welcome to the site.

    0Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    11y

    Welcome to BP community @Sunny Burns  It is a great place to meet new friends and learn about various aspects of real estate and more. Here are a few recommendations for you:

    Find and connect with other BP members that are in your area: http://www.biggerpockets.com/meet

    Set up keyword alerts to be notified of the topics that interest you: http://www.biggerpockets.com/alerts

    If you wish to tag someone in the conversation on the forum, type @ followed by their name and then select that person below. He or she will be notified of being tagged so that the conversation will continue.

    Wishing you the best! 

    0Reply
  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    @Sunny Burns thats a great strategy and wonderful story.  You are searching in an area that will rent fast which is great news.  Have you looked into loan options for owner occupying with less then 20% down?  Thats great that you have the 20% but you may be able to put less down saving more money for your second purchase.  

    Enjoy bigger pockets, you are part of a wonderful community.

    973-975-3895
    House Hacking New Jersey563 Reviews
    WebsiteView Page
    0Reply
  • Sunny Burns
    OP
    Rental Property Investor · Mine Hill, NJ · Member since 2014 · 229 posts · 396 votes
    11y

    Hey thanks for the wekcomes guys.

    @Shawn Mcenteer I am still open to pretty much any investing strategies, but my current though is to try to get as low a mortgage rate as possible, and I feel the best way to do that is with 20% down.  I am still playing around with whether I want a 15 or 30 year. On the one hand I will be gaining equity in the house a lot quicker and the mortgage rate will be lower on a 15. But with a 30 I'll be able to have more positive cash flow to potentially buy another one quicker. Thoughts?

    0Reply
  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    @Sunny Burns in most cases my personal opinion is go with the 30 year mortgage because you can always pay it off faster if you desire.  With a 15 year mortgage you will have to pay more each month regardless so it may add extra pressure that is not needed. I understand what you are saying about getting lower rates but that is something that does not bother me so much because you will be using other peoples money to pay off the unit.  Long term you will make more money if you can get a second property faster.  i.e. 

    scenerio:

    A. 20% down  you now have to start from zero to save up another 20-25% for property number two. 2-4 years of saving? 

    b. 10% or less and you save up for property number 2 at an excelled rate, 1-2 years of saving.

    Run all the options with your lender to see what works best. Most of the time PMI is your main worry, which can be avoided/reduced with less then 20%. In my opinion it is in most investors best interest to put as little down as possible and let our tenants handle the mortgage while we find new and creative ways to buy more unites.

    973-975-3895
    House Hacking New Jersey563 Reviews
    WebsiteView Page
    1Reply
  • Jon HuberPro Member
    Rental Property Investor · Boca Raton, FL · Member since 2014 · 1k+ posts · 713 votes
    11y

    @Sunny Burns

    Welcome to the community! I'm a NJ guy myself, that just happens to live in the West Coast. Be sure to be as active and engaging as you can. This site offers a tremendous amount of information, but only if you seek it out. Read the blogs, post your questions, and its great that you've started on the podcasts. The best free education you can get. Good luck out there.

    1Reply
  • Mark LangdonPro Member
    Investor · Whippany, NJ · Member since 2010 · 356 posts · 104 votes
    11y

    As I tell most folks; do your research; research; research and look at all your options available; if its from the area you want to invest in too all the various mortgage options you have. I am an engineer also so we tend to be on the consertive side in general. Even though I always go with 15 year mortgages or less; I try to find properties that I buy & hold that the numbers will work also with a shorter mortgage time period. If you can get decent positive cash flow along with reduced mortgage time period that's even better as the tenants pay it off for you. But it's all about your situation; your goals; and where you want to go. You can leverage much more if you go to the 30 year as others have stated. It kills me to pay PMI so I never do. You seemed to have your act together already so you will figure it out on what will work best for you. Take it easy on the first transaction as most folks do not necessary do good on the first transaction. Above all; its all about the numbers so don't cave in on a so-so deal because you are eager to get going. Good Luck !

    [email protected]973-464-3839
    1Reply
  • Paul Timmins
    Specialist · Rockland, MA · Member since 2010 · 7k+ posts · 2k+ votes
    11y

    @Sunny Burns 

    Welcome. Take a good look at student housing see below. Time to build the foundation below.

    Check out the Start Here page http://www.biggerpockets.com/starthere

    Two Great reads, I bought both J. Scott The Book on Flipping Houses,The Book on Estimating ReHab Costshttp://www.biggerpockets.com/flippingbook

    Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and all the cash buyers (rehabbers) you will need.

    Consider checking out HUD homes for small multi's owner occupied gets first crack.

    You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it.

    Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over

    http://www.biggerpockets.com/files/user/brandonatbp/file/real-estate-rewind-a-biggerpockets-community-book

    Good luck

    Paul

    0Reply
  • Sunny Burns
    OP
    Rental Property Investor · Mine Hill, NJ · Member since 2014 · 229 posts · 396 votes
    11y

    Hey @Mark Langdon seems like you have a similar outlook to my own. Has being conservative(20% down, 15 year mortgage) slowed you down? That's what I worry about, but same as you, I hate the thought of PMI, and want the cheapest rate possible.
    Do you have any recommendations for banks or mortgage brokers?
    I am currently looking at Picatinny Federal Credit Union, 3.125% 15 year, 4.125% 30 year and they offer $1500 flat fee closing costs.

    0Reply
  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    @Sunny Burns PM me for mortgage recommendations.  Happy to refer who I use.

    973-975-3895
    House Hacking New Jersey563 Reviews
    WebsiteView Page
    0Reply
  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    11y

    Welcome to Biggerpockets!!!

    You sound like us 3 years ago :) We got started at 23 and 25. Right out of my graduated program. We got started by buying personal properties and than renting them out when we were transferred. At the same time we are building our rental portfolio we have investing in furthering professionally. This has allowed the second income that we save to grow substantially. So we are able to invest in pure rentals at the same time. 

    We are buy and hold investors in single class A real estate. We buy foreclosures and short sales. We put as little down as possible. We get forced equity through fixing cheap fixes that turn people off (bad wall color etc) and going through the short sale process (5-15% cheaper)! 

    We use a realtor who helps us find the homes and the process. Just remember that the first house will not be as good as the second. So the key is just to get started. Every time we have bough a house we have gotten better.

    Don't forget to check out the blogs and podcasts. Participating in the forum is a great way to network, learn and give back. Another GREAT resource is everyone's signature. MANY of us, including myself have put together a blog/website about our niche, strategy and business model. Think of them as "free" books. These are GREAT free resources too!

    Look forward to seeing you around! Please feel free to pm me if I can help! 

    1Reply
  • Mark LangdonPro Member
    Investor · Whippany, NJ · Member since 2010 · 356 posts · 104 votes
    11y

    @Sunny Burns I can't answer your question if a 15 year loan will slow you down. I always work hard to get the best deals so I can do a 15 years or less on the mortgage but that's me. Plenty will argue don't do that and leverage yourself out more to get more properties quicker. Only you know how fast you want to go and if you want to leverage yourself out or feel more comfortable paying down debt quicker. My wife is a mortgage representative so that is my secret weapon for my deals so I obviously only use her. I think your Picatinny Federal Credit Union, 3.125% 15 year, 4.125% 30 year offering $1500 flat fee closing costs sounds like a regular loan for yourself (homeowner going to live there) versus an investor loan so please make sure they are quoting you correctly as investor loans are always higher rates unless you were planning to live in a multi-family and renting out the other half to a tenant. 

    [email protected]973-464-3839
    1Reply
  • Phil Zofrea
    Real Estate Investor · Bradenton, FL · Member since 2014 · 14 posts · 5 votes
    11y

    I'm sure there are a bunch of different opinions on the 15 yr/30yr choice.  I choose 30 yr because I can always pay more on the principal and for me it's all about leverage.  Also, at a young age purchasing more properties meeting Fannie guidelines, a 30 yr will keep your debt ratio lower for future borrowing.

    Two extra things on the safety side to think about as a new investor once you get your property.  

    1) Look into getting the deed in the name of an LLC if possible (I heard it was possible, but am currently looking into this right now). See http://www.biggerpockets.com/forums/52/topics/9334...

    2) I would minimally recommend getting an umbrella liability insurance policy.

    Good luck to you - it sounds like you are in a good spot.

    1Reply
  • Sunny Burns
    OP
    Rental Property Investor · Mine Hill, NJ · Member since 2014 · 229 posts · 396 votes
    11y

    @Mark Langdon Yes its a regular residential loan. We plan to owner occupy, we currently do not own any piece of real estate. We are looking for a triplex or quad. And because of that @Phil Zofrea I don't think I'd be able to put it in an LLC, otherwise I'd probably be forced to get a commerical loan - at least I think I would, but thanks for the tips.

    @Elizabeth Colegrove that's awesome to hear another young couple succeeding in securing their financial future.  We're a little slower than you guys at 24 and 26, but I'm Glad to hear of your success, it gives me more confidence and hope. I definitely want to begin researching short sales and foreclosures more - they seem like they can provide some good opportunities. I will definitely be checking out your blog, thanks for the tips.

    0Reply
  • Sunny Burns
    OP
    Rental Property Investor · Mine Hill, NJ · Member since 2014 · 229 posts · 396 votes
    11y

    @Elizabeth Colegrove , I really like your blog - I definetly will be reading through it. @Phil Zofrea , maybe you want to consider reading Elizabeth's article on LLC's http://www.reluctantlandlord.net/crash-and-burned-with-an-llc/

    1Reply
  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    11y

    @Sunny Burns 

    Glad you enjoyed it :) Before you know it you will have more properties than you imaged. We have focused on the end goal, early retirement and completed each step through baby steps. Slowly but surly we have gotten there. 

    0Reply
  • Phil Zofrea
    Real Estate Investor · Bradenton, FL · Member since 2014 · 14 posts · 5 votes
    11y

    Just read Elizabeth's blog regarding LLC. Thanks for pointing me there. It gives me some more things to research and follow-up on. After reading, still at least glad to currently have my umbrella. :)

    0Reply
  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    11y

    @Phil Zofrea 

    LOVE my Umbrella! Wouldn't be comfortable without it. Definitely talk to your local real estate attorney, he might have a different opinion than my California one's. That was just my experience with the type and method I invest in. The thing to check out is trusts. That is my area to explore!

    1Reply
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