I live in an expensive area and the numbers aren't working

Buying & Selling Real Estate
9yFollow

I live in an expensive area and the numbers aren't working

Casey Gocel
Parsippany, NJ · Member since 2017 · 16 posts · 2 votes

I've been researching REI'ing for the past 6 months and I have yet to purchase a property. I live in New Jersey where property values and property taxes are very high. I don't have any construction experience, so I figured I should avoid flipping. Instead, I've been focusing on rental properties, specifically vacation rentals at the Jersey shore. The numbers just don't add up. Even with a multi-family, the best ROI I can get is like 3%. I've been looking at properties between $500-600K and the monthly rents are only $2,000-$2,400 (roughly 4%).

I've also looked into properties that are not vacation rentals, but the numbers are roughly the same in this area.  4% is clearly not going to work.

Flipping seems to be the better choice in this area, but that makes me nervous since I don't have construction experience and I will have to sub out all of the construction work and I fear I could lose all of my profit that way. 

I'm starting to get frustrated that I can't find a deal that works.  I'm determined to buy a property this year, but I don't want to buy something unless I can make the numbers work.  

Do any of you out there in the BP Community have a similar problem with living in a high-priced area? Does anyone have any suggestions for me?  I'm very eager to start investing!

Thanks in advance for any advice you may have! 

1Reply
375 views

Most Popular Reply

Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
9y

Hi Casey! I live in LA and the problem is the same out here. I've always just bought out-of-state properties. That way I have lower entry prices, higher cash flow, etc. So investing non-locally is one option. Flipping would be the other option, but my hunch is to say follow your hesitations about not having experience or feeling like that's what you should do. Flipping can of course be an option, but it's honestly a very different animal than just having a rental property. If it calls to you do it, but only do it if it really calls to you. Otherwise you could end up with a significant amount of stress to deal with...

5Reply
See this reply in the discussion

81 Replies

Jump to latestLatest
  • Hank Keller
    Rental Property Investor · Mansfield, OH · Member since 2017 · 151 posts · 117 votes
    9y

    @Harrison Smith I have full control of all my TK's; The deed is in my name, I approve all tenants, I approve all repairs (if I want to), etc. I had much the same mindset until I saw how my investments were run and the consistency of my returns over the past 4 years. I've since backed off some allowing repairs up to $250 before being notified and get copied on any tenant changes. I'll PM you the company...

    0Reply
  • John Spina jr
    Contractor · Staten Island, NY · Member since 2016 · 147 posts · 38 votes
    9y

    @Joseph Pugliese

    I saw you mentioned that you receive information on REO properties. In regards to a flip. Do they have to be all cash deals?

    0Reply
  • Casey Gocel
    OP
    Parsippany, NJ · Member since 2017 · 16 posts · 2 votes
    9y
    Originally posted by @Hank Keller:

    @Harrison Smith I have full control of all my TK's; The deed is in my name, I approve all tenants, I approve all repairs (if I want to), etc. I had much the same mindset until I saw how my investments were run and the consistency of my returns over the past 4 years. I've since backed off some allowing repairs up to $250 before being notified and get copied on any tenant changes. I'll PM you the company...

    0Reply
  • Casey Gocel
    OP
    Parsippany, NJ · Member since 2017 · 16 posts · 2 votes
    9y

    @Hank Keller Can you please Send me the name of the turnkey company that you use? 

    0Reply
  • Adam Anderson
    Developer · Palm Harbor, FL · Member since 2015 · 307 posts · 96 votes
    9y

    @Casey Gocel, you definitely can't rush it! I know how you feel here in North NJ. What I personally found was that the only way to get a good yield on a rental property here is to buy a distressed property or foreclosure at a discount then fix it. I found that in most of Morris and Sussex county you can get a double digit return if you can keep your aqusition and rehab costs at or under 70%-75% of the Value, which is also a LTV that most banks want. If you aren't into the rehab side of investing, have you considered finding a Partner that is?

    What other areas besides the shore are you looking at?

    Adam

    0Reply
  • Richard B.
    Rental Property Investor · Nyc, NY · Member since 2016 · 62 posts · 26 votes
    9y
    My comments - You definitely should look in central & South Jersey or Phila suburbs. Jersey shore & north Jersey won't work well but There are NJ opportunities where the numbers work. You gotta be willing to travel though. Find your first property that needs mostly cosmetic non structural work to start. Pay for an inspection so you can feel more secure what you are getting yourself into.
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free