All Forum Posts by: Steve Wilcox

You can not, and in all honesty you should really only expect to get the $1227 portion. 

In my experience S8 tenants generally don't pay their portion, so make sure your numbers work with this amount if not, move on to the next candidate. 

I feel for you as I live in Northern NJ, and have similar super high pricing structure and the rent to price ratio makes it impossible to rent out in most areas of NJ. 

If you are tied to this area, flipping may be your only realistic option. You could get a HML for purchase and rehab, you will probably need about 35% of the total project in cash to make your lender feel comfortable. HML will not be as concerned with your lower personal income as much as they are with the deal.

Also in these areas it is difficult to ever create cash flow if you need to buy in a/b areas. Also the live in house hacking method will not work out to live for free because of high taxs and high property values. 

Something else to consider would be to move to a cheaper area, I know NH is much cheaper, or you could move to another state with better metrics for REI. If you have a job that is not paying you well enough to qualify to invest in your local market, and no family and friends to help to tie you to the area moving is a consideration if you are serious about REI.

My wife and I have considered moving to a place like TX or FL where based on our income and current capital reserves we would be rich compared to where our local prices put us. For us my wife makes great money and needs to be in NYC in order to max out her potential for career growth, but moving to an area that is more landlord friendly with lower taxs and property values is a constant conversation. 

If you stay you may need to focus on flipping because that is what is workable in YOUR local market based on pricing metrics. 

We look at industrial and I have a partner whose family has made millions doing industrial development and leasing. 

I think this is a rich mans game, if you have a great space near major roadways it can be attractive for heavy construction, garbage companies, big landscape companies, ect, however if your tenant leaves there is not an abundance of 'industrial tenants' the same way there are people looking for an apartment to rent. You will have long periods of vacancy, you may have to complete fit outs for new tenants, but when you have someone in there they could stay for a very long time, and are very low hassle. 

Maybe @Joel Owens could share some of his thoughts on industrial investment property for non owner occupants

I use Goodson Law offices in montlcair, they do tons of investment properties, wholesale deals, back to back closings, ect. 

You can call and ask to speak with Chris, reference me and they will take care of you. He is responsive, has a large enough team in his office to get work done quickly and has title companies that work with wholesalers 

Montclair is a tough market to buy and hold houses. We have a few commercial things there and see a little better yield but that is only because we buy distressed and pay based on current operations, make improvements and raise rents. 

Most of Northern NJ (where 'young professionals' would live) simply does not make sense to invest for cashflow. Unfortunately we have high taxs, and property values are also very high. When I started investing I would exclusively rehab and flip houses because I only would buy in class A areas and everything would be a negative cashflow deal if we held it. 

I invest in Newark and Elizabeth, for better or worse this is much rougher than montclair south of bloomfield ave, but it does cashflow nicely. Investing in tougher areas is not easy and I would not recommend for a newbie especially on a part time basis, self managing. 

I know many others on the forums invest in Trenton which is another tough market but at least you will see some cashflow. 

Unfortunately in our area the market is very hot on multifamily, in nice areas multifamily is trading at the highest valuation in history which makes it very difficult to buy and hold for cashflow. 

Recommendations are as follows

1. Look into what it takes to be successful in tougher areas- i.e Newark, Trenton, Paterson, ect

2. Put some money into a larger syndicated deal if you have a decent nest egg to play with, some commercial deals are out there at a slightly better yield. 

3. Look into other areas of NJ not as geared towards young professionals

4. Look into PA and other nearby out of state areas

5. Look at other strategies like rehab and flip if you want to invest close to home

If you are looking in ironbound or downtown that is probably about right. IN areas where most of the units are owner occupied, metrics like cap rate are irreverent and you will not hit the same returns we do in tougher areas. 

Owner occupants generally dont care about cap rate, NOI, ect because they are not buying for investment they are only interested in a nice place to live in their chosen neighborhoods.

Also deals are almost never listed at current good deals, you will need to make offers and negotiate people down to your number more often than not. I generally look at 20 properties, make offers on 10, and might get 1 deal

Used Stuff is a problem- if you have them present during the lease out, the person will expect them to be in good working order. Most used appliances do not come with warranty. Your best bet is PC Richards or a small mom and pop place you might have a relationship with. I use a local company here that takes care of me for giving them lots of repeat business, and all the items come with warranty. I use Jacobsons in Elizabeth, and Tarek will take care of you

PS. adding washer/ dryer is a huge value for your tenants. 

 I agree with this statement entirely. In my area there are many opportunities to add value by fixing units that are currently either slums or uninhabitable, and forcing appreciation. Also my local urban market has a lot of potential for upside given it is a major transportation hub with direct access to NYC in less then 20 min via train or path train, there are major universities in the downtown, NHL team, and is the main location for Prudential, who is actively investing in building more office towers in the 'hood'. I think that by stabilizing the areas in the long term there is a good chance that we could be the next Brooklyn, and if not I still get great cashflow.  Also our city was once a very wealthy city home to businesses, and high income business owners, it was not always rough, and it may not always be rough. 

Many areas in the country do not have the same advantages I listed above and low income housing is HIGHLY regional, in my area its literally block by block, and it takes a ton of area knowledge and operations knowledge to be successful. Investing in these areas is not for everyone, is not easy, and the yields are never quite as good as they look on paper, but there is money to be made. 

 I could not agree with you more. 

I apologize to the OP but my post was not directed really for you. I believe that low income housing is one of the most effective ways to build a large portfolio. I agree that it is not for beginners, and not for part timers. As you said in your previous post those who are successful are fully invested in this strategy, and it certainly is a job. When I look at investing in real estate I do not believe it is a passive asset class, even with PM. Some real estate investments may be more hands off like triple net (NNN), but any residential investment requires management and maintenance to make sure your asset is going to be in good shape for the future.

It is important for all investors to define their goals, and what they hope to achieve with their investments. 

If you have a large sum of cash at your disposal, a great career that you already love, and are just looking to supplement your retirement income, or leave something to pass on to your children then low income housing is not for you and NNN is probably the ideal product.

If your goal is to build a large portfolio, you are going for this all the way, and real estate investing is or is going to be your career there are a lot of solid points to be made for investing in low income housing. 

My passion on this topic comes from the large number of posts telling the OP that he should only invest in good areas or places he might want to live himself. There are tons of people making tons of money with low income housing, it is a job, it is difficult, but if anything worth while was easy everyone would be rich. 

All of my units are in low income areas that have all the problems associated with what one might call 'ghetto'. There are shootings in nearby neighborhoods, people will steal the copper if the place is vacant, finding good tenants is really tough, and most many of our tenants are section 8, or some other form of subsidized rent, and I roll up my windows and lock my doors when driving around. I would never wear a watch or drive a nice vehicle to my properties, I always watch my back, and I have become aware of the things to stay away from and blocks not to stop on. 

This is a real business, and it is not easy. It takes a great team of property managment, local attorneys, maintenance, house sitters, and many more. This is not for newbies, or the faint of heart, dealing in these areas requires a very thick skin and is an acquired taste. If you are afraid to get out of your car you should not be there. If you don't have a competent LOCAL manager you shouldn't be there. 

I am NOT A SLUMLORD, just because my properties are in tough areas does not mean I run them like a slumlord. We provide the best product for the same price as everyone else, and that gives us the choice of lots of potential tenants. Section 8 tenants have the golden ticket, because often they dont even pay, and section 8 inspects so if they destroy my place they run the risk of loosing their voucher. 

This topic is very near to my heart, as there is money to be made in low income areas, and you provide a valuable service to the community if you operate correctly. In my areas there is a shortage of GOOD housing stock for tenants, many other landlords are slumlords, but if you do a good job, have the RIGHT MANAGEMENT TEAM in place there is money to be made (but its not easy, if it was easy everyone would be rich). There are plenty of people who are good people who lack the education, capacity, ect to earn enough income to move to nicer areas but that does not mean they are not decent human beings who will take care of the property to the best of their ability. 

In my area of the country the yield on a/b properties would be negative, so only mom and pop type investors who want to buy a unit or 2 or 3 to help supplement retirement income or so they can make some money in 30 years when they pay off the property buy. Otherwise its completely speculative play based solely on potential appreciation

A question to all those naysayers who have posted against this- How many of you own any property? How many of you own 10 units or more? I would be willing to bet very few.