$0 down on a duplex in NJ and Living for Free.

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$0 down on a duplex in NJ and Living for Free.

John Walter
New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $535,000
Cash invested: $12,000
Sale price: $545,000

Purchased a duplex as a house hack in Elizabeth, NJ. This was a new construction, which was delayed nearly nine months for whatever reason. In the end, it worked out in my favor, as COVID has dramatically pushed prices up in my area. Other new builds in less attractive parts of town are selling for over $600k, which is great for me.

What made you interested in investing in this type of deal?

I really wanted someone else to pay for my mortgage. I am only a few miles from NYC, so the cost of living is through the roof. My goal was to eliminate my largest expense.

How did you find this deal and how did you negotiate it?

This new construction was available in the neighborhood where my family lives. It also just so happens to be three blocks from a train station with direct access to NYC (currently under a $70+ million renovation). Asking price was $545k; my realtor suggested I offer $555k because of the hot market. I decided to offer $535k and that was immediately accepted.

How did you finance this deal?

I used a VA Home Loan through Veterans United. Typically, Veterans Affairs charges the VA Funding Fee with mortgages, which would have equated to over $11,000 for my property; however, because I have a disability rating, I was exempt from this. In the end, I put $0 and had the other unit rented a month before my first mortgage payment was due.

How did you add value to the deal?

This was a new construction so I was able to choose my own finishes and pick upgrades where I thought appropriate. Since closing, I have made upgrades to the backyard, as I will be living in one of the units.

What was the outcome?

I am living for free.

Lessons learned? Challenges?

The importance of a good team and having those you can trust on your side. Choose a realtor with some experience. Ask questions and do not settle.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Rob Weigand, my loan officer, from Veterans United is a Rock Star. He was the only solid member on my team. He provided fantastic service, advice, and prevented me from erupting on my realtor more than I ended up doing.

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Account Closed
Flipper/Rehabber · Cincinnati, OH · Member since 2020 · 300 posts · 417 votes
5y

This is awesome! Congrats @John Walter!

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  • Joseph Firmin
    Rental Property Investor · Smyrna, GA · Member since 2018 · 974 posts · 645 votes
    5y

    @John Walter - this is fantastic dude. Nice work! Keep it rolling and investing, you've positioned yourself very well for the future!

    0Reply
  • Account Closed
    Flipper/Rehabber · Cincinnati, OH · Member since 2020 · 300 posts · 417 votes
    5y

    This is awesome! Congrats @John Walter!

    2Reply
  • Tiago Ferreira
    New to Real Estate · Northern New Jersey · Member since 2020 · 15 posts · 3 votes
    5y

    Congrats @John Walter. I've been looking for small multi-families in NJ and know there is a lot of availability of them in Elizabeth/Newark area, but I just don't know the areas well enough. Any advice for a newbie in the field?

    1Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @John Walter

    Awesome!

    [email protected]614-363-2787
    Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews
    WebsiteView Page
    0Reply
  • Mark F.
    Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes
    5y

    Congrats but I'm definitely missing something. Duplex and living for free, so you're occupying the other half I assume? Or you living in the basement and renting out both units? Whats your mortgage and rental payment? I thought rents in Elizabeth were $1200 to $2k depending on size. 

    0Reply
  • John Walter
    OP
    New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes
    5y

    @Mark F. Good to see you on the call today; I've been out a while. I'm living on the second Floor and am renting the first floor and basement together as one large unit. Paid 535k with a 5-year tax abatement, so my PITI for five years is only $2,807. There is also a home warranty since it's new construction so I don't plan on having too many repairs in the first few years. Rent for the other unit is $3,000 even and tenant pays all utilities. If I moved right now, I could get around $2k-$2.2k a month for my unit and still not be the most expensive.

    @Tiago Ferreira Do you plan on living in the unit? If so, it’s more important you love where you want than trying to snag a great deal. We can definitely talk about the better areas though if you want. 

    0Reply
  • Mark F.
    Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes
    5y
    Originally posted by @John Walter:

    @Mark F. Good to see you on the call today; I've been out a while. I'm living on the second Floor and am renting the first floor and basement together as one large unit. Paid 535k with a 5-year tax abatement, so my PITI for five years is only $2,807. There is also a home warranty since it's new construction so I don't plan on having too many repairs in the first few years. Rent for the other unit is $3,000 even and tenant pays all utilities. If I moved right now, I could get around $2k-$2.2k a month for my unit and still not be the most expensive.

    @Tiago Ferreira Do you plan on living in the unit? If so, it’s more important you love where you want than trying to snag a great deal. We can definitely talk about the better areas though if you want. 

    There it is, I knew I was missing something. Makes sense then. The tax abatement is due to veteran and disability status correct? Good to see you too and im glad you're taking advantage of NJ tax breaks for us veterans. Wow $3k for first and basement? You're getting me excited to rent out mine together as one unit!

    0Reply
  • John Walter
    OP
    New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes
    5y

    @Mark F. Actually, the tax abatement is due to the fact that it is new construction. Rule is it has to be an owner-occupant, so if I did move, I would lose the abatement. Since I'm saving about $1,000 / month in taxes, I'll be staying here a while. Veteran benefits are pretty low in NJ (at least that I an aware of).

    1Reply
  • Tiago Ferreira
    New to Real Estate · Northern New Jersey · Member since 2020 · 15 posts · 3 votes
    5y

    @John Walter I do not plan to live in the unit, but want to buy at a good area, so can attract good tenants. 

    0Reply
  • John Walter
    OP
    New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes
    5y

    @Tiago Ferreira Got it. Elmora Hills is the more affluent part of Elizabeth (northern part), so you may want to start your search there. East Grand Street, west of 1-9 has been experiencing a great turnaround the past few years, but as a result there’s a lot of competition. My family gets text messages from investors almost on a daily basis, trying to buy property. The one positive, most investors here haven’t realized English isn’t most peoples first language so texts are ignored and post cards get thrown away. There definitely potential here. 

    2Reply
  • Tiago Ferreira
    New to Real Estate · Northern New Jersey · Member since 2020 · 15 posts · 3 votes
    5y

    @John Walter Thank you for the tip. 

    0Reply
  • Jawar Mejia
    New York, NY · Member since 2022 · 1 post · 0 votes
    4y

    @John Walter hello John, I hope everything is going well with your investments and congrats in your success. I am a vet with a disability %, I'm looking to buy in North NJ, my question to you is; would you recommend Veterans United to work with? Is there anything that you would have done differently or is there anything you wish you had known before signing up witht hem? Thank you!

    0Reply
  • John Walter
    OP
    New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes
    4y

    Hey @Jawar Mejia I would definitely recommend Veteran's United. I've used them multiple times and they have always been a huge help, even enabling me to close two weeks early on a property when the deal started to go sour.

    I did a lot of planning beforehand, so I can't say there is anything that I would have done differently; however, if I would have known the market was coming to what it is now, I would have tried to buy more. Just remember with your disability percentage, you are entitled to have the VA Funding Fee waived. In northern NJ, that can easily equate to over a $10k savings. Also, make sure you have a good realtor/broker. My first purchase, I had a new agent and I suffered because of it. Don't be afraid to ask questions and not settle for the first person to come along.

    Let me know if you need anything.

    1Reply
  • Natalie Schanne
    Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
    4y

    @John Walter - congratulations. Good job with setting up your house hack so you can live for free (or very cheap) in your own apartment in your own new construction duplex while it appreciates and your tenant pays down your loan.

    1. What do you expect taxes to be after the abatement wears off? In my area, a property assessed at $500k might have taxes of $20,000 a year.

    A lot of people message me off BiggerPockets wanting to do a similar house hacking deal. Without the VA loan benefits, they either have to apply FHA which can be hard for an agent to get accepted especially on a an older property. (Most NJ multi families are 1960 or earlier) or bring 15%+ down for a conventional loan. Usually without the tax abatement I'm finding the numbers pencil out to - in a duplex, you usually can get the other tenant to pay about 2/3 of your mortgage payment in fair market rent, so you end up paying 1/3 of the mortgage plus incidental expenses including vacancy out of your own pocket.

    0Reply
  • John Walter
    OP
    New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes
    4y

    @Natalie Schanne Thank you, I appreciate it. Trying to guess the taxes here in three years is completely up in the air. The city is currently going through a complete tax restructuring. They have sent letters to all the residents advising they will be sending appraisers to all properties in order to better evaluate how much taxes they are charging. Originally, I would have assumed to be charged about $14,000 after the abatement; however, that could completely change now.

    This purchase has been a home run though, so I am not too worried about taxes. This tax "restructuring" seems to be catching on from municipalities as I recently had another property's tax assessed value increase by 500% from last year (not exaggerating). I am of course challenging the city on it, but even then I only expect it to maybe decrease slightly.

    For this NJ duplex, I really bought at a great time. I purchased this new construction for $535k and similar properties are now selling in the 700's. That said, I also got a 2.25% interest rate, so my PITI is around $2,700. Granted, when the tax abatement goes away that payment will increase significantly, but considering I am currently earning over $4,500/mo. in rent and living in one of the units, I'm OK with that.

    I would certainly agree the 2/3 of the mortgage being covered is more common, especially with prices the way they are now.

    1Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    4y

    Congratulations @John Walter ! 

    0Reply
  • Lindsay Op de Coul
    Chicago suburbs · Member since 2021 · 98 posts · 52 votes
    4y

    That's awesome!!  What is next for you??

    0Reply
  • John Walter
    OP
    New to Real Estate · NJ · Member since 2020 · 124 posts · 63 votes
    4y

    @Lindsay Op de Coul Thank you, I really appreciate it. Next on the agenda for me is to try and purchase either another small multi or a mixed use property. The mixed use would be in the NJ market, but the multi could be anywhere. 

    I just looked at a duplex the other day that actually got me excited for the first time in a while. Yes, it’s a bit over priced and of course listed “as-is” and buyer responsible for all certifications, but it’s the location that excites me. For this area, I am only interested in properties within walking distance to the train station and this is only a stone’s throw away. I’ll be keeping an eye on it to see what happens in the next few weeks. 

    1Reply
  • Lindsay Op de Coul
    Chicago suburbs · Member since 2021 · 98 posts · 52 votes
    4y
    Quote from @John Walter:

    @Lindsay Op de Coul Thank you, I really appreciate it. Next on the agenda for me is to try and purchase either another small multi or a mixed use property. The mixed use would be in the NJ market, but the multi could be anywhere. 

    I just looked at a duplex the other day that actually got me excited for the first time in a while. Yes, it’s a bit over priced and of course listed “as-is” and buyer responsible for all certifications, but it’s the location that excites me. For this area, I am only interested in properties within walking distance to the train station and this is only a stone’s throw away. I’ll be keeping an eye on it to see what happens in the next few weeks. 

    Ok!! Happy hunting and good luck on the next venture, I hope you find it soon!
    0Reply
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