Union city, New Jersey buy and hold

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Union city, New Jersey buy and hold

Michael Baffuto
Rental Property Investor · Member since 2018 · 15 posts · 2 votes
Hi All, I’m looking to purchase my first 3 family property in Union City, NJ. The home borders Weehawken which is one of the best areas for buy and hold in NJ. I’m a little concerned on a counter offer the listing agent made. We offered $705k and they want $729k. It’s not much but I’m worried because I can’t find comps in that area. As far as buying and holding the rent roll is decent and I’d break even every single month so not that great of a cap rate. Only putting 5% down so would love to get anyone’s feedback that is familiar with union city. Do we think the market will go up or down? Any help would be great. Thanks
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
7y

@Michael Baffuto

$729,000 will likely be close to $750,000 when all closing costs are factored in. That comes out to $250,000 a unit.
Normally it is difficult to have positive cash-flow for a property once the unit costs above $200,000+.

Difficult but not impossible of course. The property while may not cash-flow positive may be more likely to increase in value than others. However, do you want to be in the cash-flow game or the appreciation game?

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  • Michael Badin
    Rental Property Investor · Apex, NC · Member since 2015 · 197 posts · 102 votes
    7y

    I know of the area but not enough to make any analysis statement. However you said you would break even every month? You will not have any cash flow? Don't purchase a property just for the sake of being able to say you bought one. You want to make money off of it.

    3Reply
  • Michael Baffuto
    OP
    Rental Property Investor · Member since 2018 · 15 posts · 2 votes
    7y
    @Michael Badin thank you for your note. It seems that every single property in this area would only allow me to break even or make like $100 a month. It’s because I’m putting down such a little amount.
    0Reply
  • James Lloyd
    Attorney · Chatham, NJ · Member since 2016 · 63 posts · 40 votes
    7y

    Are you represented by an agent?  If you are, then ask your agent to find comps.  

    Is there something specific about this property that makes it difficult to pull comps?  Are the other houses in the neighborhood not 2/3 family homes?  

    This sounds like typical haggling over price...  I don't know what the Union City market is like, but at least in the Morristown area, the market has cooled and is more buyer friendly.  

    If you accept the offer at 729 and you don't love it, then when you get your home inspection report back, you're probably going to end up asking for the moon (because you're paying top dollar, at least in your head) (or be required to ask for the moon by the mortgage lender).  The Buyer/Seller relationship will deteriorate and likely the contract will fail then anyway.  Find a price where you still love the property and willing to deal with the defects found in the home inspection report.  

    My understanding of Union City is that its a lot like Jersey City.  A lot of development and it really depends on the neighborhood you're in.  If you're in the 'next' neighborhood to get developed, then you will likely see appreciation.  I have no knowledge of the neighborhoods so I can't tell you anything more than that.  

    1Reply
  • Michael Badin
    Rental Property Investor · Apex, NC · Member since 2015 · 197 posts · 102 votes
    7y

    $100 a month is better than $0.  Have you considered other areas?  NY is across the bridge.  I don't imagine it being any better there though.  PA where I am located is a couple hours from you and there are some good areas along the border of NJ that you could get a good return / cash flow.  Depends if you are willing to have that drive and the patience to find the right deal.

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  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    7y

    @Michael Baffuto $700k sounds not cheap for three family in Union City. Is the property newer construction? Based on your numbers, I did a high level calculation. My math gives me a negative cash flow. Just make sure you include all the expenses ( property tax, water & sewer, insurance, PMI, electricity and gas if any, and basic maintenance).

    It is hard to predict the market, especially now. I would say just make sure you buy a property that produces positive cash flow, just in case. If you need to put in money every month, you need to be okay with that. Just don't get surprised after. 

    2Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Michael Baffuto

    $729,000 will likely be close to $750,000 when all closing costs are factored in. That comes out to $250,000 a unit.
    Normally it is difficult to have positive cash-flow for a property once the unit costs above $200,000+.

    Difficult but not impossible of course. The property while may not cash-flow positive may be more likely to increase in value than others. However, do you want to be in the cash-flow game or the appreciation game?

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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    4Reply
  • Mala S.
    Investor · Jersey City, NJ · Member since 2013 · 129 posts · 122 votes
    7y

    @Michael Baffuto , Union City could be a great place to invest. Union City is an easy commute to NYC and the Mayor (although controversial) has done a lot to improve the city like repaving sidewalks, adding trees and nicer street lights and adding parks, pools and sprinkler parks.  I prefer Union City south of the 495. Also, Union City hasn't experienced the same hype as its neighbor Jersey City Heights with its inflated prices. These are all reasons I think Union City still has room to grow. 

    Some cons about Union City are that the taxes are really high - even for New Jersey. This might be a reason for slowed growth. Also, the schools aren't great. It's a little weird to have high taxes with bad schools in the same city...But Jersey City schools aren't great either and people a rushing to buy 1M+ multifamily houses in the Heights...

    729K is on the higher end for Union City. I hope the property is in decent condition. Keep in mind that insurance goes up drastically for a 3 family house. This surprised me on my last purchase. My insurance for a 2 family was approx $1200/ year and my insurance on 3 family approx $3600/ year! I'm still shopping around for a better rate with not much luck...I've been quoted in the $4000's..uggh!

    2Reply
  • Alex Yi
    Member since 2018 · 8 posts · 4 votes
    7y

    Considering the exorbitant number of price cuts I see just based off my 5 minutes of research on Zillow, Redfin, and Trulia I would stick to my guns with your initial offer. As an investor you want to make the numbers work for you, and if they don't, you simply do not pull the trigger. In my own unprofessional opinion (not an agent, broker, or have much experience besides 1 property in West NY - I believe we are in a buyer's market. 

    My advice is to stick to the principles, which for me is purchasing cash flowing properties and B areas without accounting for the possibility of appreciation. 

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  • Juan Cabrera
    Jersey City, NJ · Member since 2018 · 28 posts · 16 votes
    7y
    @Mala S. In my opinion, which probably doesn’t mean anything, i believe union city is over priced. You can get better returns elsewhere. UC has good flip returns.
    0Reply
  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    7y

    @Juan Cabrera  I think the price is relative. On average, union city is still around $100k ~ $200k cheaper compared to JC heights. Hudson County is much cheaper than other places close to Manhattan. But it is hard to compare: city, tax, and buyers are very different. Maybe JC heights and Union city are both over priced. 

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  • Christopher Gerena
    Hudson County · Member since 2018 · 21 posts · 7 votes
    7y

    I definitely second trying to get some comps. There has been 3 family properties in Union City that have traded in the last 3 months, and while they may not be exactly the same, I think they will be able to help you get more clarity. Also when you say "border", do you actually mean border, I lived in Weehawken on a block where all you had to do was cross two streets and you were in Union City, while the proximity is close, the towns are not that similar for a variety of reasons. Then again that is reflected in the difference of prices between the two towns. It is tough to speculate without knowing all the info but I would stick closer to your offer than the counter just based off the little I know.

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  • Mala S.
    Investor · Jersey City, NJ · Member since 2013 · 129 posts · 122 votes
    7y

    @Juan Cabrera I agree that there are much better places to invest than Union City if monthly cash flow is the only metric. 

    Personally I like investing in places that I know well, with value add potential and are within easy commute to NYC - with sufficient cash flow. 

    Full disclosure, I don't currently own property in Union City but I have in the past. Union City is on my shortlist of places I would like to buy my next property in the next year. 

    1Reply
  • Sen A.
    Rental Property Investor · Union City, NJ · Member since 2018 · 40 posts · 66 votes
    7y

    I'd consider anything east of New York Ave. as bordering Weehawken. 

    Recently, Union City has amended their rent control laws to include 3-family non-owner occupied houses. Just something to be aware of before you buy:

    https://cecininilaw.com/landlord-tenant-blog/union...

    3Reply
  • Alex Furini
    Architect · Cary, NC · Member since 2018 · 96 posts · 63 votes
    7y

    @Sen A., I read through the document and I am generally familiar with the concept of existing rent controlled buildings in NYC. Question I have is, what is the process for determining rent control rents on existing buildings? 

    Say I purchase a 3 fam non-owner occupied building in Union City today. Say each unit rents for $1,000 x3 = Gross rent $3,000. What is the effect on these rents now and in the future. FYI, This is just an example. I cant seem to find the actual financial calculation details.

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  • Sen A.
    Rental Property Investor · Union City, NJ · Member since 2018 · 40 posts · 66 votes
    7y

    @Alex Furini Look at the code under 334-10  Permitted Increases.  https://www.ecode360.com/15397118

    Max rent increase is 3.5%.  For qualified seniors, it's 2%. Maybe you can ask some other BP members who currently own 4+ family properties in UC for advice.

    2Reply
  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    7y

    @Alex Furini I don't know about the exact law. Here is what we are told to do by the city: 1, register the rent rolls with the city if it is not registered; 2, every year update the registration form to reflect the new rents. The new rents can only be increased up to the latest CPI growth rate (the latest one is around 1.3%).  Non-owner occupied 4 units (and above) house  are rent controlled. It seems like 3 units house is also included now...in union city, there are a lot of rent-controlled units getting very low rents (like $500 ~ $700 for small two bedrooms). I would not touch those houses ...it is very very hard to increase the rents to the market value......

    2Reply
  • Yahav B.Pro Member
    West Orange, NJ · Member since 2015 · 20 posts · 15 votes
    7y

    This question might be too basic... Excuse me if it is :)

    Does this only apply to landlords who own the entire building? What about landlords who own only 1 apartment in a 4- unit building?

    0Reply
  • Mala S.
    Investor · Jersey City, NJ · Member since 2013 · 129 posts · 122 votes
    7y

    @Sen A.  Good to know about the rent control...

    0Reply
  • Alex Furini
    Architect · Cary, NC · Member since 2018 · 96 posts · 63 votes
    7y

    @Diana Tian and @Sen A., thank you for these resources. As an investor in Brooklyn, my mindset was that rent control is a remnant from the past. As long as I didn't buy into an existing rent control building I was fine. I was actually looking at 2-3 families in Union city without knowledge of this change. I guess if you buy a vacant 3 family as non owner occupied the rents would be set/registered at whatever market rate you rent them out at.(assuming the tenants were not forced out) I'm guessing based upon NYC, if its rent controlled your chances of finding a vacant building is slim.

     Just to avoid as many landmines as possible, is this just union city, or is this common in NJ areas adjacent to NYC? 3 fam, 4 fam etc.

    Appreciate the knowledge!

    0Reply
  • Jason LeePro Member
    Real Estate Agent · New York, NY · Member since 2015 · 401 posts · 235 votes
    7y

    @Yahav B. Rent control does not apply to individual condo unit owners.

    0Reply
  • Yahav B.Pro Member
    West Orange, NJ · Member since 2015 · 20 posts · 15 votes
    7y

    Thanks Jason! Appreciate that :)

    0Reply
  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    7y

    @Alex Furini It is very common in the cities nearby. For west new york, a non-owner occupied two family house is subject to rent control as well. It is similar rule: once you purchase the building and rent out the place, you need to register the rentals if they were not registered before. Every year you need to update the registration for any increases. I am not sure about other areas in New Jersey. 

    0Reply
  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    7y

    @Alex Furini when you are interested in a two-family (or above) house, it is always good to find out what the registered rents are.  

    1Reply
  • Steve Haines
    Member since 2019 · 6 posts · 4 votes
    7y

    Union City by Park Avenue (near Weehawken) is a very very hot real estate market for 2 main reasons:

    1. It seems to have some of the most growing development.

    2. It gets a bit of "spill over affect" from adjacent Weehawken (where home values have soared) exponentially).

    0Reply
  • Mark F.
    Rental Property Investor · Northern NJ · Member since 2019 · 673 posts · 677 votes
    7y

    Hello! Old thread but very similar to the info here I'd like to confirm some things. I'm looking at a 4 unit with two units vacant and two occupied in UC.

    1st ones rent is $975 per letter from rent control board that was sent to me

    2nd ones rent is $1000, realtor says $1300 but gets $300 credit for being the super

    Questions are..

    I can charge market value for the other two unoccupied units correct?

    I can increase each currently occupied units rent by 3.5% after giving over 30 days notice? They are m2m leases.

    Thanks guys and gals. Just trying to wrap my head around this before I submit my offer.

    0Reply
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