Is NY or NJ better to invest as first property?

29 Replies

Hi Bigger Pockets members.

I am a first time real estate investor who is looking to invest in NJ or NY (within 1 hour ride to Manhattan).

My budget is max $500,000.

Which town would you recommend to look into for an investment property?

Also, any tips you can give in terms of finding a website where I can do more research about investment worthy neighborhoods?

Looking forward to your tips!

Thanks,

@Julia Sung - investments are very personal. Some areas have higher expected appreciation (think Hoboken). Some areas have higher expected cash flow (think Camden, Trenton, student housing rentals). Which game do you want to play? I met a guy who syndicates apartments. He lives near Denver Colorado. If he had focused on Denver Colorado, he’d probably be worth 3-5x more what he is now after buying in cheaper states because the appreciation went crazy. But it’s not entirely predictable. Who would have thought you could buy a house and sell it for 3-5x as much in San Francisco between 2009 and today, meanwhile probably not cash flowing at all. In Trenton New Jersey I have met many investors buying older row homes for $30-60k and renting for $1100-1400/month with about $3000/year of taxes.

@Julia Sung I just moved out of the city but I lived there when I started investing so I ran into this same issue.  Within 1 hour of the city is a little difficult if you are looking for cash flow.

Edision, Newark, New Brunswick potentially, when you go up to 1.5/2 hours out you have better options with mercer county in NJ

@Julia Sung Do you plan to live in the property or use it strictly as an investment? 

Your 500k budget is pretty healthy, you have enough for downpayment and reno if needed. There are many decent SFRs that you can buy at that price point. If you plan to live there you could have roommates and cut down your living expenses while cash flowing. You could get a multi but can be tough to cash flow now in desirable areas such as Morristown or Jersey City. You could do well in an owner-occupied triplex. you'll be able to get in at 3.5% FHA which isn't a bad way to start.

If you plan to live in the property, spend a Saturday and Sunday driving around areas that interest you. From there you can see what inventory is available in that town and neighboring towns. 

Good luck

Originally posted by @Julia Sung :

Thanks so much for your advice, @Antonio Cucciniello! 
I also looked into Newark, but it seems like the neighborhood has a bit higher crime rate than I would’ve liked! I’m not sure if that assumption is correct!

No you are definitely correct there! Are you living there? If so it makes things a little more complicated 

My personal opinion is that no first time investor should consider Newark as it has some of the strongest language with rent control that I've ever read.  Unless you have serious systems in place you can easily get burned there.  Regardless of crime @Julia Sung .   As a first time investor you should chase easy & low maintenance for a good experience to build upon, not higher returns.  If you chase high returns and you're not set up properly for them, bad things can happen which effect those returns.   Just my 2 cents.  

As for which state overall is better? Personally I lean towards NJ as NY has put into effect state wide rent control. And I personally believe that NJ is a bit more landlord friendly, however not by much.  

Hey Julia. I'm a newbie investor in northern NJ with 1 door, working on the next 1-2. I've found that, aside from the towns that have been mentioned here, looking in Sussex and Warren Counties might make sense. You may still be within an hour of NYC. Taxes and home prices are lower. That being said, so are rents, but it's not impossible to find investments that make sense from a numbers perspective.

As you get into these more rural areas, do be aware that you may end up looking at properties that have septics and well water. This isn't necessarily a deal breaker for some, but I try to steer away from these kinds of properties, myself.

Hi Julia

I'm a real estate agent and investor in both NJ and NY, so this hits home for me. 

Lot's of aspects to cover such as the goal and how much you want/are comfortable with managing. My partners and I see NYC downtrending in many higher income areas as far as appreciation goes. NJ is booming, some areas have increased as much as 10-15% in appreciation over the past couple years so thats massive (not to mention the rents are through the roof as well). 

For this reason, I also agree NJ is the way to go. As Darren said, Newark (and similar areas such as East Orange etc..) might be a bit of a challenge for a newer investor. However, I wouldn't let that stop you without at least looking into the area(s) firsthand with someone experienced in those locations. Most of the tenant issues I've experienced or have seen could have been mitigated with proper tenant screening and a solid lease agreement. The way I see it is: more time invested = more potential profit. Less time invested and more comfort = less potential profit.

There are plenty of areas to look at so I would suggest doing a tour of the area and go from there. Bergen, Essex, Hudson, Passaic, and Union County are going to be your preferred choices given the distance criteria you supplied.