APO, AP · Member since 2016 · 168 posts · 54 votes
I am currently looking at investing in New Jersey to buy and hold. However the property taxes are expensive and eat into a lot of the cash Flow, any other investors who deal with this have ideas?
Glen Ridge, NJ · Member since 2016 · 69 posts · 41 votes
10y
As a NJ resident for most of my life there are a number of advantages to living here. With the military and corporate jobs I've gotten around a lot so here's my take on NJ.
Property taxes are high in NJ that's why everyone moves out of state. It's the cost of living next to some of the most exciting cities on the planet NYC & Philly. All things are relative though, you can charge higher rents and if you're not looking in some of the more down neighborhoods you can find some interesting deals.
There are over 100 municipalities in NJ that have some sort of rent control legislation so before you invest you should look to the city hall before you pull the trigger on a purchase. Good luck
Investor · Longmont, CO · Member since 2016 · 19 posts · 21 votes
10y
Hi @Dylan Tettemer, for me, it's about the big picture. Run your numbers. If the deal works, then the property taxes are just another one of the assumptions. However, be careful you properly forecast for increases in the property taxes. Don't ever assume they will just remain flat after acquisition. So, I don't worry so much about whether one state has higher property taxes than another. However, here's another thing for you to consider: If New Jersey a "landlord friendly" state? If your tenant doesn't pay the rent, do the local laws favor the landlord, or the tenant? How long does it take to carry out an eviction? Those are the things I consider when I look to invest in any state. Good luck!
APO, AP · Member since 2016 · 168 posts · 54 votes
10y
Mark Walker thank you! How do you plan for property taxes? Just add a 5% increase? Because after I run the number I usually only have 150 for cash flow which in my opinion is not worth it and won't account for raised property taxes
Investor · Cape Elizabeth, ME · Member since 2016 · 12 posts · 9 votes
10y
Here in Maine and in most of New England we have high property taxes. Just need to run the numbers and make the deal work. If not walk away. Also be aware that taxes may vary significantly from town to town. It's worth looking at other towns or regions where taxes may be lower.
Glen Ridge, NJ · Member since 2016 · 69 posts · 41 votes
10y
As a NJ resident for most of my life there are a number of advantages to living here. With the military and corporate jobs I've gotten around a lot so here's my take on NJ.
Property taxes are high in NJ that's why everyone moves out of state. It's the cost of living next to some of the most exciting cities on the planet NYC & Philly. All things are relative though, you can charge higher rents and if you're not looking in some of the more down neighborhoods you can find some interesting deals.
There are over 100 municipalities in NJ that have some sort of rent control legislation so before you invest you should look to the city hall before you pull the trigger on a purchase. Good luck
Investor · Longmont, CO · Member since 2016 · 19 posts · 21 votes
10y
Dylan Tettemer , I don't know the NJ market, so I don't have any insight on a safe increase to assume. However, in reading Tim Pagano 's post, it looks like he may have some valuable experience with it.
Mark
Garfield, NJ · Member since 2016 · 26 posts · 8 votes
10y
@Tim Pagano , thanks for the tip regarding rent control legislation. Would you happen to know if property taxes have a cap the way variable mortgage APRs do? Or can it truly skyrocket as deemed necessary from county to county?
Glen Ridge, NJ · Member since 2016 · 69 posts · 41 votes
10y
Your question makes me smile. No there is no cap on property taxes that I'm aware of. If only it were so. Tax considerations should never really drive your investment strategy anyway. Yes it should inform your decision but not completely drive your decision. As an FYI here in NJ you pay state income tax and a local municipality property tax. There are county taxes but they pale in comparison to your municipal and state taxes. Property taxes pay for the school system her in NJ. In Essex County where I live the county taxes are paid through the payments I make to the local municipality. Hope this helps.
I am currently looking at investing in New Jersey to buy and hold. However the property taxes are expensive and eat into a lot of the cash Flow, any other investors who deal with this have ideas?
There's no legal way to avoid paying your property taxes. If you can't locate a deal in NJ with which you can generate your target return, look out of state.
New Jersey, NJ · Member since 2015 · 327 posts · 137 votes
10y
There is one way of lowering your NJ property taxes, if you were in the military like myself, NJ provides a tax credit. Here in NYC they take 35% off for war veterans. I see on NJ dot gov is about $200-$400 off which is not much but it's something so try to take a look at what property tax exemption your county provides.
@Tim Pagano , thanks for the tip regarding rent control legislation. Would you happen to know if property taxes have a cap the way variable mortgage APRs do? Or can it truly skyrocket as deemed necessary from county to county?
There is supposed to be a cap on property tax increases at 2% a year, but there are so many loopholes in it, 60% of towns in NJ had a larger than 2% increase. It's discussed in detail in the Bergen Record: http://www.northjersey.com/news/property-tax-cap-growing-weaker-across-north-jersey-more-towns-than-ever-exceed-2-limit-1.1526980
Real Estate Agent · Hackensack, NJ · Member since 2014 · 321 posts · 412 votes
10y
Welcome! High property taxes are something we have to deal with here in North Jersey. Some towns are better than others. Just have to calculate them in your numbers. Rental market looks like it will be strong for years to come with less younger people buying homes. You can appeal property taxes, but they have to be off by 15% for you to win your appeal.
Rental Property Investor · Yardley, PA · Member since 2012 · 436 posts · 198 votes
10y
You do need to watch the taxes. The can fluctuate greatly among similar properties in NJ. At least from what I have noticed. We have successfully lowered the taxes on a few properties. It's worth an appeal once and a while.
Someone mentioned Evictions... Mercer County NJ is extremely fair. I have been through the process a few time.
If you are truly looking for cash flow consider Trenton. The numbers are really nice IMHO.
Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
10y
New Jersey has a state-mandated 2% cap on property taxes. However, there are so many "exceptions" built into the mandate, that local towns regularly exceed the cap. Dumont, for example, raised their property taxes 2.35% this year, but their Rent Control Ordinance is pegged to the CPI and for the last few years has only allowed Residential Landlords to raise rents by .008%. It's infuriating and I have been in the process of getting the Rent Control Ordinance changed (wish me luck). In the interim, Landlords regularly file annual Tax Appeals to recoup some of their money (which municipalities hate). Hope this answers your question.
I haven't had to evict a tenant in NJ so I haven't been through the process here, but I have friends who have. I had to go to the Essex County Court House for an unrelated matter a few weeks ago and I had to wait with a number of tenants facing eviction. It seems that not paying your rent can get things moving pretty quickly, but understand that there is also a robust defense system here in the county. All that said there still seems to be a booming eviction business in Essex County from my one day experience. It boils down to the landlord having their act together and being on top of the process and following the letter of the law.