On January 12, we hosted our monthly NJREI Wholesalers and Rehabbers meetup, with a discussion moderated by our colleague, Eddie Lopez. Here, we share some key takeaways from the event.
We began with a quick 2020 review as we experienced it at Peak Private Lending. Most notably, as the pandemic hit the northern NJ/NYC area, we saw many people were having difficulty getting loans and closing deals. Things were tight with typical hard money lenders until June or July.
Because of that, we had a strong spring (April through June) at Peak; plenty of people were still buying properties to rehab and flip and we were quite busy getting deals done at that time. Over the course of the spring, the situation in our lending areas started to return to some semblance of normal in the lending sector.
Looking to 2021
A popular question among our attendees was if the market is heading for a crash. We do not believe so and we believe the market will be strong this year for real estate investors. In fact, New Jersey is one of the hottest states for real estate due to:
· Low inventory and high demand
· Low interest rates for loans
· The migration out of New York City renting to suburban home buying
Another question was about whether the rental market would be affected. At this time, it’s hard to say; we believe the higher end will be stable. There is a demand for small multi-family rentals, especially due to the lower cost of financing. This is also a great way for real estate investors to build their portfolio—whether as a short-term rehab project or a long-term investment.
Important factors for shielding your profits, especially in a down market, are:
· Know the property’s cash flow history
· Understand rental income potential vis-à-vis market conditions
· Minimize/control debt (don’t overextend) – be especially mindful of this if tenants are struggling to pay rent
· For condos, be aware of HOA/maintenance fees
Two sure-fire factors that always impact fix and flip investments
Without hesitation, Glen named ARV (after repair value) as the number one factor that determines profitability or loss. “It’s my number one key to securing your profit on every single deal you do.” He stressed the importance of arriving at this figure properly and accurately based on exact location (for example, which side of the lake is that house on?). Paul shared that absorption rate within a market is also important in this determination: how long are properties listed and what are their selling prices.
The second factor is the cost of the rehab. What will that construction project cost you, and how will it affect your profit? The construction budget must make sense and the general contractor should provide a full scope of work with an itemized budget. We recommend getting a full home inspection before you invest in a property, for full visibility into what needs correcting. Be sure to factor in other expenses that might not make it to the home inspector’s report, such as replacing outdated windows or flooring for cosmetic reasons, or new appliances. Another key factor here: the construction/rehab timeline.
Other top tips:
· Remember, real estate investing is a business, and you’ll experience ups and downs
· In New Jersey, it’s a seller’s market and is likely to stay that way into fourth quarter – so get your rehabs done and listed
· Upgrades help get you top dollar in a competitive market
· We are bullish on market opportunities, and remain active as real estate buyers and sellers
· At Peak, we offer private lending to a range of real estate investors, from newcomers to the seasoned and highly experienced – we want to invest in quality fix & flip and other deals, including joint ventures
· We also believe in protecting the borrower, which is why we offer a confidential deal analysis
Peak Private Lending is the authority on NJ real estate investing and private lending with an emphasis on the fix & flip investor. If you’re seeking a fast and easy way to borrow money, we’re here to help. Contact us for a confidential deal analysis and expert advice from the team who is also experienced investors.