The US Real Estate Playbook: Expert Insights from NingXi Borak

Yasi Zhang: Today, I have NingXi as my Fast Track podcast guest. She is a private investor with a diverse portfolio that includes real estate across the US and investments in private companies. Before stepping into full-time investing, she worked as an investment and data analyst at top investment management firms in the New York City area.
In 2022, she made the leap from the nine to five world to focus entirely on growing her own investments, while also embracing the freedom to explore life’s opportunities beyond office. She is excited to share her journey, insights, and lessons learned on the Fast Track podcast.
So welcome, NingXi.
NingXi: Thanks for having me.
I’m excited.
Yasi Zhang: I know you already for more than decades, and it is so interesting for me to see you are initially working. I think initially you were working at NGO and then later you did additional studies and then later you did, completely different work and now you are completely independent and you opened some kind of like yoga or fitness studio.
And now as a real estate broker, like you really took a different path . So I’m curious you started with real estate investing and become a real estate broker in the US.
NingXi: Yeah. My path has been quite unconventional. I did liberal arts in college and I went to business school and I. I always knew I would probably work in business or finance one way or the other. And I got started with real estate just before the pandemic really at the time as a way to get a supplemental source of income.
I didn’t think I could, I leave the nine to five world right away obviously. That was a goal in the back of my head. So I started right before. The pandemic. So I started following, bigger pockets with I was reading the forums, looking the podcast, and just trying to get as much information as I could.
So I started with one. My first property was a condo. I was actually an out of state investor. I. So it was a little nerve wracking. That was probably the most nerve wracking deal I’ve done, even though it was probably one of the simplest. Yeah. From then just, I was able to take advantage of leverage or the credit that I had and finding good deals and just scale from there on onwards.
Yasi Zhang: A little bit more about your first investment. How did you decide that is a good investment? What’s your thought process and what is the process that you need to invest in out of state property? Do you need to travel there often or is this is there someone there locally that you can give the power of attorney to help you to do that?
NingXi: So my first property was in Austin, Texas. I picked the market ’cause I thought it was it was a market with good growth potential. So fast forward two or three years into the pandemic, that was a right prediction even though for the past couple of years that market has come down somewhat.
But I didn’t. I didn’t know anyone actually at the time. I went down there once or twice. And I went on tours with different agents and I picked one one property that I liked. And when I closed it was actually all remote. ’cause I was in New Jersey and the time. So my agent went to the the walkthrough for me, and then I was able to close remotely.
And then since I closed, I went down there once. It was actually like at beginning of COVID and I was doing some showings myself. But then from, it’s been more than five years at this point, but mostly it’s been remote. I probably have been there on average less than a year. So I was going down there more often in the beginning, but now not really at all.
Yasi Zhang: What is your decision making process? How did you know that is the one you are looking for?
NingXi: The property you mean? Yes. I wanted to be in downtown and. I was looking for my budget. I think I could have gotten a two bedroom or right on target. But then I found this one bedroom in really like desirable location with a building with good amenities, good management.
So I was able to hit a pretty a lot below my budget. So that was good. That left me some. Capital that I actually was able to leverage to buy a condo in New Jersey that I lived in. So I had probably a few to choose from, but I just felt the most comfortable in that neighborhood, in that area.
And I thought it would be easy, a place that would be easy to rent.
Yasi Zhang: Besides location, do you have other criteria on your checklist?
NingXi: Yeah. So because it was, I was buying into a condo, it was important to make sure that I would be able to rent it out. ’cause some buildings have restrictions on, when or like what time of the year you can rent your unit out.
So this building just cleared? No, I was able to clear all the requirements. I think the requirements no more than 30% of the entire of all the units could be rented at the time. And it was only like in the teens, so I knew I wouldn’t have any issues. So that was also a one of the criteria.
Yasi Zhang: You feel afraid or is a big step to take?
NingXi: Yeah, it was definitely scary and it was probably the most scary and most exciting deal that I’ve done, even though looking back it was just a small deal and a pretty straightforward one.
It probably took me just about a year, from starting to be interested to actually jumping in also, because like around the beginning of Covid, that’s when interest rates were basically crashing in the US. So I really just took advantage of that. ’cause when I talked to a loan officer, he basically said, I’ve been doing this for 20 or 30 years I’ve never seen a rate like this.
Like at the times, like 3% more or less. That was just that was an indication that if I wanna buy, I should just seize the moment then. And I’m glad I did because now I probably will probably never have that rate again in, in our lifetimes.
Yasi Zhang: And from that property, how did you go on to invest, to invest in other properties?
Can you tell us more about your investment journeys in the past five years?
NingXi: Yeah. From there. I think, oh, I did I got a really good deal just outside the, in the DC area, just outside DC in Northern Virginia. And it’s a very low priced building because it’s on land lease. So a lot of investors tend to stay clear of land leased buildings because the building, the buildings don’t own the land.
So once the lease six expires the HOA feeds may go up significantly or, the owners might even lose a property. So the land lease at the time would expire in, over 30 years would expire in the 2050s. So it was a really great location because from that building you can walk to DC. So it’s a very good location close to subway, lots of things to do, but significantly cheaper than the other buildings in the neighborhood because it’s a land lease, it’s an older building, it doesn’t have all the bess and whistles. So you know, that’s just a very, I saw as a very good opportunity, even though I knew I was taking on the risk of basically losing the property when the land lease would expire.
But in general, I’m more of a cash flow investor rather than appreciation. I did the math and realized I could, cashflow per month at a pretty decent level enough so that if I could, keep this cashflow coming every month for 30 plus years, even if I just, lost the property when the land lease expired, I would be happy.
With it. So I think it was a pretty, pretty much a no brainer for me at the time, even now, I think, but also because a lot of people, like as soon as they hear that it’s a land lease they won’t even consider it. So I think that helped.
Yasi Zhang: And that was the second one
NingXi: Yeah. That I bought to invest.
Yeah.
Yasi Zhang: Okay. Did you buy more. Later on.
Yeah, actually
NingXi: At the time I bought two units in the same like apartment complex in two different buildings. And then, yeah, because of the unique situation, ’cause it’s actually a co-op, not a condo. I don’t know, probably in Europe there is a similar concept, but co-op basically means it’s not real estate, it’s personal property.
So it was harder to get a loan, but there were like two specific lenders that were working with the building because of the fact that it was a co-op and because it was on the land lease. So I didn’t really have a lot of financing options, which is basically two lenders. But still it was a, it was, a great deal.
Even thinking back on it now.
Yasi Zhang: So you mentioned a lot about you are doing your math and that the numbers is right for you. For anyone who is interested in investing a real estate property, what kind of numbers should they look at?
NingXi: The Cap rate is probably the most cited number. It’s essentially your indication of what return you’re getting.
So how much I, expect to, from an income perspective, get out of the building the property versus how much you’re, you have to put in. And it’s also a useful indicator because it’s financing agnostic, meaning no matter where you it doesn’t matter where your down payment is, your capital will remain the same.
So whether you’re paying cash or you’re taking out a 95% mortgage, the cap rate does not change. That’s a really, that’s a kind of baseline metric. So I think it’s easy to, it’s probably, it helps to think of it as like your return on capital. ’cause it’s the income you can expect to get divided by how much you’re paying now, and then your interest rate.
If you’re financing, then your interest is basically your cost of capital. So if you compare your return on capital versus your cost of capital. It’s like what you’re paying for versus what you’re getting back. Ideally your cap rate should be higher than your interest rate.
There are also me other metrics like your cash on cash return, but that’s going to be impacted by leverage. So the less you pay upfront, less cash, your pay upfront, the higher the potentially higher the cash on cash rate will be. But because it’s leverage, and leverage obviously is a double-edged sword.
So if the investment pays off, your cash on cash return will go up. The less you pay the higher the return it will be. But if you have something called a negative leverage, meaning the investment doesn’t pay off, and if you’re borrowing a lot of money, then you’re much worse off than if you have paid cash.
Yeah, cash. Cash on cash return versus cap rate are usually the two indicators that I look at. Mostly, I would say more so on cap rate.
Yasi Zhang: And what is the percentage of those two indicators do you think would be a good investment property in the US?
NingXi: Now it’s hard in a lot of markets hard to get a cap rate higher than your interest rate because interest rates are so high.
In the sevens or maybe like high sixes. So if you can get a property with a cap rate of 7%, that’s usually a pretty good deal. But it’s hard to, they’re hard to come by. Maybe we’ll talk more about it later on, but it also matters. I think it’s easier to get a higher return if you’re doing short-term rentals versus long-term rentals.
But short-term rentals are more work on the owner’s part, with respect to cash on cash return. It really depends on how much down payment. It is because the lower the down payment, the basically your cash-on-cash return gets a boost. In a very good deal, if you only pay 5% down and you borrow 95%, you might get a cash rate like in the teens or even 20%.
But that’s that would say those would be very rare.
Yasi Zhang: And then when you look at the cap rate, is the expected yearly rental income divided by the total, the price of the property, right?
NingXi: Yeah. So, it’s NOI or net operating income. So your annual rent minus your expenses, like property taxes, HOA fees, if it’s a condo, insurance, like maintenance utilities.
So your net. Net operating income divided by your purchase price. Purchase price would include your closing costs as well, because paying a bunch of fees when you buy.
Yasi Zhang: Okay. Then then one has to make some assumptions based on how, what’s maintenance, cost, utilities, et cetera. So to be on the more conservative side, then if you take a higher number on the cost, then that will lower your cap rate.
NingXi: Yeah.
Yasi Zhang: Okay. And how do you how do you estimate the rental income or net rental income in a market that you are not living there?
NingXi: I will start with the top line where your gross revenue or gross rent. Pretty much, you can get the numbers anywhere, if you just go on Zillow or any of the websites.
So like hot pass you can look at what your neighbors are charging. If it’s a building, it’s probably even easier because in a building you might have your neighbors upstairs, downstairs, on the same floor, with the same layout, same size if you see what they’re charging. That’s pretty much how much you can charge if it’s a house or single family house.
And you might have more leeway in playing around with what, how much you can charge. But still, everything depends on the market. So I wasn’t really worried about that because all the numbers I could, get online like remotely. So that’s a good starting point. And then property taxes, I think for all the markets I’ve invested in, at least, like all of them are public.
So you can just go on the county tax assess website then you can get the numbers from there. The numbers can change every year. Usually they go up every year. But still, that gives you like more or less a realistic idea. And then HOA fees, you can get that number from the agent. Insurance, you can probably also, get a reasonable estimate.
And then it’s also important to have have a reserve number plugin because your property will experience wear and tear over time. That’s, that’s the nature of the beast. So what I like to do is to just give a monthly kind of allowance. Because sometimes you have a leak or if something breaks down and you had to pay like 500 or a thousand dollars, but those are not your monthly expense.
So I estimate how much I can, I would need to spend on maintenance over the period of five years, and I divide that. By 60 to get my monthly like reserves number. Yeah, so those are the main things. And if you are paying utilities versus asking your tenants to pay for utilities and that, that’s another expense as well.
But all of them I think, can you, can, if you just do some homework and find out.
Yasi Zhang: Okay. Yeah.
NingXi: Ballpark.
Yasi Zhang: Yeah. And then let’s talk about tax. What are the taxes associated to owning a property and then renting the property.
NingXi: You have your property tax, so that varies by state and by county even by municipality.
And unfortunately, like where I like own properties, like in Texas and New Jersey, they’re like two of the highest in the country. But investing real estate also gives you a lot of tax from an income tax perspective, a lot of benefits because all of your property taxes can be written off.
So your gross revenue, you can write off all the expenses including property taxes to arrive at your net taxable income. That’s in addition to depreciation expense, which is not really an expense. And then how it impacts your income tax. There. There are a lot of things you could do. I think we can still use cost segregation or bonus depreciation. I think now it says 60%. It used to be at 100%, but now it’s been going down year by year. So basically you accelerate your depreciation expense upfront. So on paper you might have a big loss, even though your cashflow may be positive because of the depreciation.
Kind of like the phantom expenses, they’re not actual cash outlays, so a lot of investors do like bonus depreciation to accelerate their their property depreciation upfront in order to claim a paper loss, in order to get a tax refund. And sometimes that can be sizable and they use that tax refund as a down payment for the next property.
So it just goes onward. But obviously at some point you will have to recapture the depreciation expense. I don’t know how it works in Europe, but maybe something similar exists. So for residential properties, you can depreciate for 27 and a half years. So if you, that’s based on your purchase price plus your closing costs divided by 27.5, you, so
Yasi Zhang: the assumption is that after 27.5 years, the house value will be zero.
NingXi: It’s not really, I can estimate on the property value will probably go up. But it’s just the idea that even like everything inside the house can be depreciated. It’s like you, if you buy furniture, you can depreciate it by five years. If you get a new cabinet, you can depreciate by 15 years, but for the whole property, it’s just a 27.5.
That’s how much, that’s how many years. You can claim depreciation expense.
Yasi Zhang: But this is this is just an assumption, right? It’s not in reality, but for tax posts that the housing value is the value based on purchase price or is the value based on government guidelines? Estimated price?
NingXi: Purchase price plus closing cost.
Yasi Zhang: Okay. And then divided by 27.5, then you can depreciate this value, and then it will be a phantom cost. And so you minimize. Your income tax. But after 27.5 years, you cannot depreciate it anymore, right?
NingXi: No. And when you sell, you have to recapture, it’s called depreciation recapture.
So if you claimed a hundred thousand dollars in depreciation costs over the years when we sell the house that $100,000 will be added to your profit or sale price. So you would have to, depreciation is always just a tool for you to shift around the income? Yes. It’s never just a free, it’s never free money.
Yes. Yeah. So a lot of people do that 10 31 exchange. So they sell one probably to buy a bigger property. Then they defer paying the tax. Yes. And then if they doing that until they die, then it goes to the, to their heirs.
Yasi Zhang: Yeah.
NingXi: That’s how people, like a lot of people play the game essentially.
Yasi Zhang: What is the tax rate if you sell the property for profit?
NingXi: It depends on your overall income, because it looks at all your sources income. If you have a W2, you have a lot other investment income. And then, yeah. Okay. It’s considered capital gains, basically. It’s capital gains tax rates is lower than income. It’s gonna be lower than a regular nine to five job.
Yasi Zhang: Okay. Okay. I see. But I, if you sell one and you don’t buy another one, you have to pay back this depreciation. It will be added as your assumed income. And to cost the capital gain from the transaction, and then the tax rate might be higher than it actually, yeah.
Yeah. Okay.
NingXi: Yeah. So actually a lot of people run into this problem. A lot of properties are held in the same family for many years, maybe two, like over generation. So a lot of people have this issue and then they are in basically a time crunch to do a 10 31 exchange because. You wanna do to do a 10 31 exchange?
Their strict timelines.
Yasi Zhang: What is 10 31 exchange?
NingXi: Essentially the idea that if you sell, if you don’t, if you sell this house and you, if you sold it, you will owe a lot of income taxes. Yes. All the depreciation, recapture, then you can sell it and immediately buy a bigger, a higher value property.
Then you don’t have to pay. The capital gains tax. So it’s right, it’s, it is a way to defer. So a lot of people just have no, they do this for life.
Yasi Zhang: Okay. I understand. So you just keep rolling. Keep rolling. Okay.
NingXi: Until you give it to your heirs.
Yasi Zhang: Yeah. What about the financing? How many percent can up to the value of the transaction price that can people get loan?
NingXi: If you house hack, meaning if you buy multifamily and if you personally live in one unit and you rent the other units out, then it becomes your primary home and then you can, so if that’s the case, you can borrow up to 95%. So that’s a lot more, leverage obviously, but also more risk. But I think everything, that’s the easiest way to get started because you only have to pay 5% down payment. That’s, that’s much more realistic than having to put down 20%. So that’s a good way to get started. And then you can personally live in, if you buy a duplex, you can buy, you can live in one unit and you can rent the other unit out and your tenant will be paying for the
Yasi Zhang: house.
NingXi: Oh,
Yasi Zhang: what if you live in a multifamily home with five apartments and you live in one? And would the lender still consider, okay, you live there yourself and then they give you this 5% down payment ?
NingXi: Yeah, I see what you mean. I think there is a cap. I think it has to be maybe under four unit, because anything above that’s gonna be considered a commercial rather than residential because you could buy a whole building with 200 units.
So I think the. Don’t quote me on this, but I think that there’s a cap. It might be four or three but yeah, to prevent institutions from taking advantage of it.
Yasi Zhang: Okay, I understand. And if people pay 5% down, they have to pay interest on 95% of the mortgage. Would that make sense for a lot of people to do that versus just paying rent?
NingXi: It depends on a lot of factors. Because if you, even if you’re cashflow negative, meaning you are, the rent from the tenant doesn’t cover all your expenses, but even if you’re only, cashflow negative for $300, but consider the fact you’re living there. And if you were to rent, the rent would be like, let’s say a thousand, 2000.
I think that’s. I would take that. Of course, it depends on market.
Yasi Zhang: The, in the scenario that you just pay for one condo, you live there yourself and then you finance this with 5% down payment and 95% mortgage with high interest rate, and then the monthly interest that you have to pay versus the rent you have to pay.
What do you think, which one would be higher?
NingXi: If you buy a condo, then you wouldn’t be able to house hack because you have to live there or you just rent it out. Then I think that if you take an investment mortgage, I think the minimum down payment is 20%. I more, maybe some lenders can do 15, but I don’t think you can just put 5% down.
But that’s act, the, like maybe let’s put house hacking aside. If you just compare buying a condo. And renting it out versus renting the condo for yourself. That’s actually a lot of, that’s a common dilemma right now because in a lot of markets in my market, including my market, it’s actually, it’s easier to it’s cheaper to rent a condo or an apartment than to buy a, even with 25% down.
So if you rent an apartment, you could rent it for 4,000 or 3000. If you have to buy it and put 20% down your HOA taxes, mortgage would be 5,000. Or if
yeah.
Yasi Zhang: So the, okay. Even if you put 20% down, your monthly cost would be much higher versus if you rent. So imagine if people just put 5% down and then the monthly cost would be even much higher than just rent.
NingXi: Yeah. Yeah, but if you house hack, then at least you’re living there. Yes. Yeah. Also, like usually like multifamilies have higher returns. Yes. At least from my experience, because you’re buying a building with two, three units versus a condo. Also, there’s no HOA fee. There are more things to worry about, like your roof, your foundation, but there’s no, no HOA fees to worry about.
Yasi Zhang: In this market, there wouldn’t be a no brainer choice for people to rent instead of buy?
NingXi: I would still buy multifamily because if I were to, I’m not looking to buy anymore, but if I were, I wouldn’t be interested in condos just because it just doesn’t make sense because high tax high HOA fees and maintenance.
So I would be looking into Multifamilies. Yeah. Househacking specifically.
Yasi Zhang: Yeah. Because you’re a real estate investor. For average person, like many other people who are not investing in real estate, nobody would want to buy.
NingXi: I think there, yeah. Condos are a hard sell. As investments, like some people buy it as a home, then that’s a different story.
But I think. From an investment point of view, it’s, I will only be looking into houses specifically like Multifamilies, ideally with three units. ’cause you buy one building, one structure, then you can live in one. And you have you have two apartments, you have two investment properties. That usually gives you higher returns.
Yasi Zhang: And you were living a multi-family house right?
NingXi: Yeah, so that’s actually what I did about three years ago. So that’s where I live now. I live on the top floor of a small brownstone, and then we have two rentable units downstairs.
Yasi Zhang: What do you think are the pros and cons of renting apartments out?
Because then you have to take care of a lot of stuff for the tenants.
NingXi: Yeah, it’s definitely a lot more work. For example, like we have to repair the roof because it was leaking, like the basement was flooded a couple times. Like the boilers, the furnace, it’s just like water heater, like things you never have to worry about if you bought in a building.
But, so those are the downsides, obviously. But the upside is definitely the returns. ’cause if I just bought a condo. Like I, it, it will be extremely difficult, if not impossible, in my market to cashflow. It’s just, it’s very difficult. It was difficult when I bought, five years ago, it would be, pretty much impossible now.
So it’s like you either have to pay where you have to work. Know, you pay more, you get a lower return, or you don’t get a return at all if you buy into a building where you have to buy a house and actually work you with maintenance. And also another downside is with people living downstairs.
Sometimes there can be a privacy issue, even though there are separate entrances. But you might run into, basic strangers like at the main door, the main front door, or if something happens if you have, bad tenants who are loud in the middle of the night and it’s like having bad neighbors.
So there is also like a privacy sacrifice a little bit as well.
Yasi Zhang: And what is the current interest rate in the market right now in the US?
NingXi: Probably in the high sixes, so 6.8 for a 30 year mortgage. I haven’t been following it as closely as I was, but I think that’s. That’s where we’re at.
Yasi Zhang: It sounds very high compared to the interest rate in Switzerland.
NingXi: What is it? What is it in Switzerland?
Yasi Zhang: It actually went down so before the, in the first year when Covid just started, it was. 0.65%, 0.8% or 1% and they increased to 3% and now it came down again to around 1.5 to 2%. Depends on how many years of yeah, you wanna get,
NingXi: what’s the typical amortization period.
Yasi Zhang: It’s very different. You don’t have to pay back. You can have the loan forever, as long as you have 35% of the equity. So you pay 20% down for your, the apartments that you are living yourself. And then the 15% of the rest of the value, and then you have to pay back in 15 years. So you pay about 1% per year.
So after you paid 35% of the value, which you own, the 35% equity, the rest of 65% can be financed forever, as long as you are qualified to, to get a loan.
NingXi: Every month you pay down the principal as well, or is that interest?
Yasi Zhang: No. It’s just the principal is the 15% you have to pay back within 15 years, but after 15 years you have your 20% down payment.
You have the 15 year 15% you already paid back, and then 65% of the principal can be as, as the loan, as the mortgage can stay forever.
NingXi: Okay, so every month you just pay the interest like forever.
Yasi Zhang: Exactly. Yeah, forever.
NingXi: Oh, interesting.
Yasi Zhang: So the monthly payment is actually much smaller in terms of cashflow, cashflow wise compared to in the US or other markets that you have to pay back the principles over 30 years.
NingXi: Oh, wow. That’s interesting. So basically the loan may is, will never be paid back.
Yasi Zhang: Yeah, if you are qualified, some people retire, they have much less income and then the loan expired. For example, you have a 10 years mortgage and after 10 years the bank will evaluate your affordability. And then if you don’t have any income or very low income, maybe you are not qualified.
But usually people have that discussion with the bankers before retirement. But it’s, so I think usually it’s not a big issue because the interest rates did not fluctuate so much, like from 1% to 6%. It was from 1% to 3% and just for a couple of years then it came down again.
NingXi: Wow. Wow. That’s amazing. Yeah. Actually, Europe, the rates is so low.
Yasi Zhang: But foreigners cannot buy here, so that’s why. Very stable market. I have another question regarding the challenges or mistakes, not necessarily the ones you have made, but you’ve maybe you’ve seen other people making mistakes while investing in real estate.
NingXi: I think the biggest risk, and thankfully I, having encountered it myself, is to, is getting bad tenants. And this varies from state to state as well, because every state has its own laws. But in my state, in New Jersey, it’s a very tenant friendly state. So the legislation no more often than not, protects a tenant rather than landlord.
So if you get a bad tenant who doesn’t pay or who destroys a property. The landlord’s almost, guaranteed to lose a lot because you can’t just kick them out. You have to wait a certain period of time, and then you have to go to court and serve them an eviction notice and you take them to court and then you have to get a judgment from a judge.
And the whole thing is probably like a whole years of rental income lost plus your time, your legal fees. So definitely screen your tenants diligently because that’s. I think that’s a single biggest thread is you get someone you know who doesn’t pay or completely destroys a property and then disappears.
Yeah. That’s my biggest fear.
Yasi Zhang: How about for buying when selecting a property? What kind of mistakes people can make?
NingXi: Obviously location matters a lot. Also, I think the location pretty much determines what kind of tenants you’re gonna get. ’cause in, if if you consider the medium income level in a certain neighborhood, if you’re buying a not so great neighborhood there, you might get.
People who might have more issues just, struggling to pay rent. But if you buy in a more higher income neighborhood usually, your risk is lower. It’s never zero. But also looking at the saturation ’cause I we bought a house in Florida for. A rental, but it didn’t do so well.
So we actually sold it last year. Because where I live now in New Jersey is there’s basically no land. Land is just extremely precious. Like all the buildings here, basically there’s no land not even space for parking, but where we bought in Florida there, there was a lot more land. So like new developments kept popping up.
So that obviously just injected a lot of supply to the market. So you know that was not a profitable property for me because partial, no, I think mostly because of the market I didn’t select so well. ’cause land was so available and new developments kept, even in Austin, there was, we had the issue of access supply ’cause people kept building and building there and pretty much the market crashed.
In Austin, even though we did well the first couple of years, but during covid it just, it had a meteor, meteor erotic rise, but then it, came crashing down.
Yasi Zhang: Okay, location. So during the process, like the search process, right? I wonder how is it like working with the agent in the US because it’s very different in Switzerland.
In Switzerland, basically you find a property online and whoever is the agent in charge of selling that property, they got in touch with him too for viewing. And then you look for another property yourself, and there’s another agent. It’s not like what I’ve seen in some market that you can work with one agent, then the agent will help you to find a property for you.
So how is it like in the us?
NingXi: Yeah, usually you have one agent, the buyer’s agent, and then you buy it through him or her. So him, he or she will. Liaise with a listing agent, with a seller’s agent. It’s possible that a seller’s agent also becomes your agent. So if you don’t have your own agent, if you go to an open house.
And then the listing agent will almost definitely reach out to you and try to represent you. So in that case, the listing agent becomes a dual agent, but there is, some inherent conflict of interest there because the list, the agent has to represent the best interest of the land the seller, but also you.
So I would prefer to have my own agent because it doesn’t really matter ’cause seller pays both agents. So it doesn’t, it has no impact on the buyer. So I think it makes sense to have your own representation, which is know the majority of the time anyway.
Yasi Zhang: Oh. So in the US as a buyer, you don’t have to pay.
Agent fee is the same.
NingXi: It’s negotiable and anything can happen. But that’s the common practice.
Yasi Zhang: What is the percentage of the agent fee?
NingXi: It’s also negotiable. We had a, like big suit on this two years ago. So it’s. It was always negotiable. There is no legally mandated percentage, but commonly it’s 5%, maybe as high as 6%, but you, there’s something you can negotiate.
So when I sold my house, I only paid 4%. It could go down to three, but I would say five is a reasonable,
Yasi Zhang: 5% is split between buyer’s, agent and sellers.
NingXi: Okay. Five for each.
Yasi Zhang: Okay, I understand. Can you as a buyer, work with different agent?
NingXi: You can. But ultimately when you enter the contract, you can only have one agent’s name.
So that’s ultimately it’s whoever represents you in the deal that. It gets completed will be the commission.
Yasi Zhang: So probably you can work with different agents in the search process, but when you confirmed which property that you want to buy, maybe this agent help you to find that. And this agent would be in the contract that get the commission.
Yeah.
NingXi: Now it’s also pretty new, but now a lot of brokerages will ask you to sign buyer’s representation form. So basically want to claim you for certain territory. So if you say. I designate so and so as my agent for the town of Hoboken or Jersey City, then that would be their territory.
So if you decide to buy anything in that territory within the time limit, then they will be entitled to the commission. But you can, everything’s negotiable. But you could even say, I only want this agent to represent me for this property.
Yasi Zhang: Okay. Yeah. Okay. Understand. Yeah. And looking back, were you glad that you invested so early and now the market has changed so much?
NingXi: Yeah, especially because of the interest rates, because I locked in interest rates in the two, like two because I also refi like during the first year of covid because the interest rates kept dropping from March of 2020 until basically throughout 2021. So actually refied seven months after buying a place.
So yeah, definitely. So now it would be much more difficult because the property values have gone up and the interest rates have gone up. Should have probably invested even earlier, but I don’t.
Yasi Zhang: Everybody said that. Every investor said that. Yeah. I have another question about the the mortgage.
How does the lender evaluate if you can afford this much mortgage or not?
NingXi: They usually use DTI debt to income ratio. So they calculate your monthly mortgage payment.
Yasi Zhang: Without principle. Without principle. Just mortgage?
NingXi: Monthly payment will be principal and, okay.
Yasi Zhang: Yeah, the cash.
Okay. Cash outflow divided by your income. What is the minimum?
NingXi: It varies by lender, but I think it could be as high as 50%. So if your mortgage payment, monthly payment is 2000, your monthly income should be at least 4,000.
Yasi Zhang: Yeah, I see 50%. And they use the actual interest rates that they can offer you to make the calculation.
Okay. It’s different. In Switzerland, they use assumed interest rate, which is 5%, even though the actual interest rate is much lower.
NingXi: Why?
Yasi Zhang: So they, in the calculation, they assume this interest rate is 5%, and then some banks add another 1% for. They call it like Nebenkosten and is like additional cost, monthly cost, some maintenance, utilities, et cetera.
So it’s more like 6% and then it cannot exceed one third of your income. So that’s why it’s very difficult to get a mortgage in Switzerland. Eventually, if you can get a mortgage, that means your actual monthly payment for your apartment is much, much lower than the calculation. So like the banks has a big buffer and then you as a person who owns the property also has a very big buffer.
NingXi: Yeah. That’s good. Yeah, that’s good.
Yasi Zhang: The market’s quite stable in that way, but you. You almost cannot find a 7% percent return rental property in the market.
NingXi: okay.
Yasi Zhang: Yeah. Maybe below 4% percent. That’s common. Yeah.
NingXi: Same here. Especially with like condos.
Yasi Zhang: Okay.
NingXi: Buy a fix- upper, then there, there may be more value to be extracted, but that’s a lot of work and
Yasi Zhang: yeah. Okay. Yeah. Thank you so much for being here, NingXi, and thanks for sharing with us your experiences. I know you are also real estate. Now if you would like to let us know, which area do you focus on? Maybe some of the audience might be interested and reach out to you.
NingXi: Yeah. Should I just share maybe like my Instagram or email?
Yeah.
I’m licensed in New York and New Jersey. Mostly like New York City and Hudson County in New Jersey, so Northern New Jersey. Pretty much like the suburbs of New York. Yeah, and mostly multifamily because it’s just, it’s like impossible to make money with condos.
Yasi Zhang: Nowadays with the interest rate.
Yeah. Alright. Thank you so much for being here. I really appreciate it.
NingXi: Thanks for having me.