Looking for a market. NYC / Philly / New Jersey / other??

Question

My name is Brian and I live in New York City. I am having trouble/analysis paralysis on finding a rental market to focus my efforts on. I grow up in Southern NJ/Philadelphia and part of me wants to invest there. NYC is too pricey for me to enter and I am not sure where I should invest.. I would appreciate thoughts. I was thinking Rochester, NY but that's hours away and I feel for my first investment it might serve me well to be closer to the investment. The trouble I am facing is after having run the numbers on investments in Rochester I can't find anything like there in NJ, Philly, or more southern parts of New York State. I would love to get some pointers on places that might be worth looking into.

Thank you! Brian

Lior Solomon · Answer

Hi @Brian R.

I've been trying to figure the same question for the past couple of months

I live in Bergen county NJ and my mission statement when I've started looking was kind of yours, and I was looking for 8% cap rate as a target.

Here's my 2 cents

1. There is no such cap rate in NJ unless you go to risky areas such as Camden, Trenton etc. the reasonable cap rate you should expect in decent areas are 6%

2. I would look into Essex county (Bloomfield, Oranges, Linden etc) and Bergen county(Ridgefield park, Lodi, Garfield etc)

If you are looking for someone to help you finding the relevant prospects in Essex talk to @Darren Sager , he is great.

I hope that helps,

Lior

Mark Updegraff · Answer

@Eric M.  You said it!  Due diligence is up to the buyer.  At the same time Period I spent similar amounts in areas that have doubled in value!!

Ahh boo yah!

Mike Parks · Answer

philly is always good in the right areas

Eric M. · Answer

I talk with a lot of out-of-state property owners that invest/hold in Rochester. I'll tell you right now that the biggest thing I see is investors who bought between 05-08 who want to sell - in the "risky" areas - but owe double what it's worth. An example is an owner who lives in CA and bought a single for $54K in '06. She still owes $45K on her mortgage. She needs to spend $6-8K to renovate to obtain a C of O. That doesn't include the $6-8K she'll need in 5 years when her roof goes. I'm closing on a single 3 blocks away in better shape albeit 1 less bedroom for $14K.

My point is that just because you can find cheap properties in the city relative to other areas, don't assume it's going to be a good deal. The CA owner offered to pay $20K in order to sell, but even at $25K it wasn't worth it.

Ankit Duggal · Answer

@Brian R.  The asset you can purchase for $50k; how relatively risky are the neighborhoods?

In terms of investing far away, you need two very good property management firms that you can rely on and a local realtor who can pay to be an asset manager on a quarterly basis. So if you can build out that team and you can monitor the market demand- supply trends fairly well then investing out of your area is not as big of an issue.

Amy C. · Answer

I'm a new investor, buying first property in Philly, and we live in S.Jersey...I wish we could buy in our cute S. Jersey town, but the dang property taxes prohibit the numbers from working the way I want them to.  My preference is to buy in Chicago where I lived for 20 years and the housing stock kicks Philly's... but too inconvenient for a novice.  Hoping Philly continues to improve, though I still think about 1/3 of it needs to be bulldozed.  Best of luck!

Account Closed · Answer

Great luck on your grind. I'm in the region you're from in South Jersey/Philadelphia.

Luke M. · Answer

@Ankit Duggal Hey, I know this is an old post, but could you expound on your strategy for having two property management firms, and utilizing a local realtor as an asset manager?  All of my properties are out of state (I live in NYC), and my system has been working, but I want to fully tuck into a market, and have it nailed down.  Loved your podcast episode, by the way!

Mark Updegraff · Answer

@Tiffany T.  There is no way you'll pick up anything in those neighborhoods for 50k. Especially the south wedge!   DOM are low and prices are market.  Out if the ones you mentioned Merchants is the cheapest, but you need to be careful where specifically you buy.

Account Closed · Answer

There is also an area in Rochester called the "south wedge" which you could find a decent property for around 50k but again I recommend really figuring out the best small niches in each area of the city. Some of the areas to look for in the city would bethe Monroe Ave area, Park Ave, South Wedge, North Winton/Browncroft, Corn Hill and maybe a couple more I am missing? There are def. Some good areas in the city, just need some patience in getting a good deal in those areas!

Looking for a market. NYC / Philly / New Jersey / other??

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