All Forum Posts by: Steve Schulman

Awesome stuff brother! Congrats. Definitely keep us posted @Ben Muska

“Everything you’ve ever wanted is sitting on the other side of fear.” - George Addair

Consider that for a moment: to get what you want, you just need to get past your fear. I did it, then did it all over again. And I am not even talking about the fear; I am talking about the 203k full-gut rehab. Put over 100k into the full gut, pushing through the 203k rehab for 7 months during peak COVID and finally I was two weeks out from finishing/closing out the construction loan and renting out the first unit, then I had to hit the reset, gut the place and start over due to soot/severe smoke damage from a neighbor's house fire. Sure the 203k process is rigorous and extensive, and you can bet I went through hell at some points. But not only did it all work out in the end with the investment/project but I got 2-for-1 experience with my first-house hack and learned 10x as much as I did from any podcast, forum/blog or real estate investing book I read prior.

If you have any questions about the 203k process, NJ markets, or just need a little push, feel free to reach out. Best of luck! @Larry Chen

Hi @Larry Chen – I might be bias when I say this but distressed, value-add fixer upper, all the way. Took a massive bite with my first acquisition and I am so glad I did. House-hacked and full-gut renovated a 1920’s built 2Fam here in Hudson County, which I tackled via an FHA203k loan. Not only did I force some serious equity (with 90% of the bank’s money and only 3.5% down), but most importantly I gained invaluable, first-hand experience which has truly bettered me as an investor and Realtor. The best way to learn is to do, right? Might as well jump in the trenches and learn/fail now, you will be better off later. That’s my philosophy :)

I understand this is not for everyone, as some would prefer the more ‘passive investing’ approach. But IMO, if you are searching for a great deal, you will have to put in the WORK one way or the other. For value-add, well it’s in rehab of course but if you don’t want to take on the full-gut challenge, you better get to it and prospect cold-call send direct mail *insert desired marketing campaign here* etc. 

On that note, I do find it easier to land a deal in a market like this through the former, especially in the ‘hot’ markets which I currently invest in and service. From my experience, if you are willing take on the challenges and bigger rehabs, you will be better off as most of the bigger investors/cash players and flippers are not touching those. They want ‘quicker’ rehabs and returns so they can get their money in and out of the deal. Therefore, they tend to stay away from the 1900-1920s built properties, which on top of a complete cosmetic renovations, need new mechanicals upgraded (all new electrical plumbing hvac etc.) which is not worth their time… Andddddd that’s when we come in.

Hi @Anthony Ocasio. There are ways to make your offer more attractive. Full or partial waivers on contingencies like appraisals, inspections, etc. However, with FHA it is hard since there are more guidelines, restrictions and hurdles if you will. This doesn't mean you are hopeless. Despite the many naysayers who originally claimed it impossible to get an FHA accepted over a conventional or cash offer in such a hot market, I was able to do it and do it well with an FHA 203k loan which is even more comprehensive. You just have to play the cards you are dealt and know what to look for.

Have you considered adding some value and utilizing an FHA 203k construction loan? One thing I've realized, for RE investors like us especially, the opportunity is in the older houses. You want to look for property's built in the 1900-1940s which Hudson & Essex County have a handful of. If you are willing to take on the project, not only could you force some serious equity, but IMO find it easier to land a deal in a hot market. Flippers and cash buyers tend to shy away from them built in era, which they need closer to full-gut renovations, because of the time and money it takes. These investors want quick rehab and returns so they can flip and get their money out the deal; and with these types of houses, it's not worth their attention since on top of minor cosmetics work and upgrades they usually need new electrical or plumbing, HVAC, etc. Money in money out… This is so important to know during a sellers' market like this. Those controlling the "COVID era" market are not investors (investors just pave the way), but it's your forever home buyers who are borrowing almost free money with interest rates near levels of inflation... Those dream home and traditional homebuyers are NOT buying these properties that need half to full guts rehabs. So, who is? A handful of investors like me or you who are ready to take on the work, maybe house-hack and put in some sweat equity via FHA 203k!

With the 203k rehab loan, you’d want to make sure you have a competent real estate agent by your side to guide you (one who is familiar with the extensive 203k process who can inform the seller/listing agent of the pros/benefits here to all parties), along with a trustworthy contractor and experienced lender who have both serviced these types of loans before. It is all about your team! Hope this helps.

Hi @Sidney Garcia. Best advice is to get out and see the area and market that interests you. Drive around, observe, and take notes. I lived in Jersey City prior to starting my investment journey in Bayonne which is a town over. While renting, I saw the development, turnover, and gentrification if you will happen all around me firsthand. From being "in the trenches", and also taking my motorcycle out a couple of weekends for the day, I got a good sense of the local market and streets/location to be, which helped me comfortably and smoothly transition from renter to homeowner.

I think you have the right idea with little down FHA house-hack. If you are willing to take on the work, I recommend taking it a step further and going the FHA 203k route, which is what I did on my first investment purchase. As a NJ Realtor, I mainly focus on working with first-time investors in north Jersey region, but would be glad to chat further and tell you more about my overall market view, and what I am seeing from an agent/investor perspective.

Hi Adrienn - To answer your first question, I would say it’s all relative – your age, timeframe, investment strategy, etc. I wouldn't be surprised if there is a mild correction end of summer, as the “balloon of demand” we are seeing now from COVID last year (March/April/May aka peak buying season when sellers couldn’t sell, realtors couldn’t lists and thus buyers couldn’t buy) could deflate. Simple supply and demand economics but as I'm sure you realized it's never that simple. IMO I don’t think it worth trying to wait around. That supply and demand shift could happen but there are too many variables to weigh to be certain that will be the leading factor. We are dealing with emotions which we cannot quantify at the end of the day. If you are long term buy & hold rental and you have no reason to sell aka plan to hold for eh 7-10 years, I don't see why it's a bad time to buy, especially if you are just building equity for someone else paying rent. Similar to stock investing (but even worse), you never want to try and time the market. Plus with RE there is no reason to… History will prove that as there only been 4 real RE crashes dating back to 1830s or so. I recommend you start looking but just be patient, it's not like someone is holding a gun to your head saying BUY NOW. That way you can assess/learn the market and be ready in case an opportunity does comes up. Just my two cents.

In regards, to your desired market -- I think Bayonne is very attractive for numerous reasons. From an investment standpoint, Bayonne is majority two-family's so great for house-hacking. You have the Light Rail & easy commute, Costco/Walmart, talks of the Ferry, abundant of new developments/apartment complexes, etc. Little more affordable per surrounding neighborhoods and in my opinion safer. Big reason why I started investing in Bayonne. When I first began my market search, I looked in Newark and all over Hudson County-- Jersey City, Hoboken, North Bergen, Union City, Weehawken and West New York. After extensive research and further due diligence, I found myself prospecting and putting offers in on 2-4 family's in Bayonne and never looked back. My wife and I were house-hacking our first purchase and since we were going to be living in the area we had to assess our market from not only an investing standpoint but also a standard of living perspective. What really caught my attention was the neighborhood feel/vibe – unlike surrounding areas there really wasn't much need for gentrifications as the families who live in Bayonne (Italian, Irish, etc.) have been here for generations since the Ellis Island days, I'm sure. I previously rented in the Heights in Jersey City prior so I saw all of that "gentrification" and turnover happening first-hand. Lived in an OK area but Bayonne was definitely more of a safer and welcoming neighborhood. My wife can vouch. When we weighed all the variables (the economics, landlord headaches, growth potential, standard of living, ROI, etc.), it was a no brainer to settle in on Bayonne.

Hi David. You bring up some valid points for a good discussion. I had similar thoughts at first but then I underestimated the fact that we are talking about New York City here-- the greatest city in the world. If one person moves out, someone else will move in. The market will correct itself for sure but IMO the City will endure as we are talking about the national and global population who I am sure will jump right in during this deleveraging downturn.

Just starting this thread but wanted to add quick before I get deep when you can borrow at an interest rate below the rate of inflation you’re borrowing for free. Hence why Zuckerberg a billionaire got a mortgage. Why tie up your money when it's better off elsewhere :)

Hey James - congrats on taking the next steps! I agree with @David Greene & @Evan Polaski. But would like to add to what was said. 

I started my real estate journey by house-hacking a 1920s built two-family with an FHA 203k construction loan. Swung for the fences with a full-gut rehab; gained a whole lot of experience and forced some good equity while doing so, all with 3.5% down and the banks money for the rehab. I highly recommend this route to new investors just starting out and would definitely look into it and/or speak with a lender, preferably one whose done a bunch of them. Underutilized tool if you ask me.

Hey @Danny Lee - I was born in Staten Island and still have family there so I'm slightly familiar with the area. Curious, what entices you to go invest there? 

Jersey City I rented in for about 3 years way back and after seeing the gentrification happen around me first hand, I decided it was time to get in on the action and that's when I started my REI journey. Searching for a distressed, value-add 2-4 family's in JC and the surrounding Hudson County area. I must've seen 30+ property's and analyzed close to 100... But after weighing all the variables (economics, standard of living, landlord headaches, growth, etc.), I found myself house-hacking a two family in Bayonne. Now my wife and I live and invest in here... Right in between where you're prospecting.

Would love to hear more about you story and provide value anyway I can. Shoot me a DM if you'd like to chat further.