Multi family in Union City, NJ (New York Ave/18th St) investment

18 Replies

Hi all, I'm new to this forum and new to real estate in general.

I'm wondering if some NJ locals could give me some advice on the market in Union City, specifically in the neighborhood of New York Ave and 18th St. I found a nice  3-family that I could live in and it looks like I'd make a good profit from the rent/Airbnb. The only downside is if in 5-10 years the property does not increase in value.

My questions are whether you guys think it will be a good investment, especially with the looming tax bill. According to Neighborhood Scout, it's the most expensive neighborhood in Union City, so hopefully it holds value? I'm not sure if this area has a lot of development, however. From what I read, what it has going for it is good location near NYC, but on the downside it's bus only and has a skewed population demographic.

Any help would be appreciated, I've read other threads like https://www.biggerpockets.com/forums/432/topics/254199-investing-in-multifamily-in-union-city-nj, https://www.biggerpockets.com/forums/311/topics/408572-union-city-nj-investment-potential and https://www.biggerpockets.com/forums/12/topics/291723-first-investment-property-in-union-city-nj but wanted more up to date information especially in light of the new government changes (Murphy, tax bill).

@Devin Wynn the area is good but the question really is if the numbers make sense, since there isn’t much inventory definitely not on the MLS

Union City won't appreciate in value @Devin Wynn ?  I beg to differ long term.  Proximity to Manhattan will force appreciation.  

Thanks for the reply, all!

@David Lichtenstadter I actually found a place and am about to be under contract in that very neighborhood, and the math works out where if the market appreciates just a little (like 1% every year) it would be better for me than investing in the stock market. I'm just worried when I hear news that because of the tax bill, prices will be 4% less than what they would've been in a year.

@Nicholas Sheridan, Jr. Isn't that what investing is, after all? I'm buying partly because of emotional and partly financial implications.

@Darren Sager I personally think it will increase, but I have very little knowledge of the trends. Like you said, proximity is a huge boost, but it looks like that only matters in light of gentrification and more racial diversity. But looking at trends, it seems like the racial makeup has not changed much, which is worrisome. 

Also, some thoughts here seem to make me glum http://www.city-data.com/forum/new-jersey/2330078-... (arguments of high and increasing tax, increasing mortgage rates, etc.). What are your thoughts? Thanks!

@Devin Wynn I️ don’t like to bank on appreciation but there has been major demographic shifts in that area (Hoboken) the heights, union city close to route 495 Park Ave

@Devin Wynn will continue to have a housing shortage thru 2021 according to Otteau Group.  Proximity to Manhattan will drive the most desirable real estate in NJ.  Union City will change even more so over the next 5 years.  There's a lot of investment which will continue to push into that area and raise prices.

Thanks for the input @Darren Sager , makes me feel better. But do you think this will still be true in view of rising interest rates, changes in the tax plan, and increasing property taxes?

@Devin Wynn I do.  We're in a housing shortage here in NJ. There's a lot of reason behind it.  Primarily has to do with the fact that our 7 year real estate cycle has turned into a 9-12 year cycle because peoples incomes haven't increased outside of inflation since the recession.  Because of it people aren't moving as much causing much less inventory to be available.  

@David Lichtenstadter pretty much yes.  Since incomes are flat people aren't "moving up" per se like they've done in the past.  This is causing an effect of 2 sales being lost in the marketplace. The most important being that the sale of their existing home on whoever would be moving up is not taking place causing the drop in inventory levels here in NJ.  The upper level price points in NJ (above $2M) are staying on the market a very long time and there are limited buyers for those homes.  They're sitting on the market.  The middle markets are a sellers market with so little inventory in the towns that most want, all because people are staying put.  

I own two properties in union city supporting 4 units.  Couple problems but there are pros to buying in that area.  Some of the bad include that the taxes are higher then the heights and most areas on the Hudson.   Also the resources are built to support the lower income folks... many which are Not good people but can take advantage of the system.  Think about it like this.. they provide squatters with an attorney for free from the mayors office... the city spends a lot of money on fixing the streets and infrastructure and all the people that go along with it which is great but results in higher taxes every year.  The water bill and sewer bill is separate and often rediculous in cost... parking is terrible just like everywhere else on the Hudson.. commute to nyc is the golden ticket and rents have been rising especially in the past 5 years.  1 bedrooms going for 1200-1500 for average apartments. 2 bedrooms 1600-2200 

So if you get the property cheap and can get decent cash flow with the high taxes then it’s a good deal for the future.  The heights isn’t much different and prices have skyrocketed there so union city will have its turn as well.

oh and for the air bnb idea I think they put an ordinance in to fine anyone running one in uc. Not sure but I think I recall hearing that.  Also if you’re planning construction do it by the book or be discrete.  The building department will go after you.  Also make sure it’s a true 3 family. When taking tenants you can really get screwed if it’s an illegal apt. I use to care about saving people money by doing no fee listings.  Screw that... the quality of people just isn’t what it use to be so I send my listings to Hoboken now and try to get their spill over. Anyway.. good luck!!

Thanks for the info and tips @MIchael G. I remember seeing an ordinance years ago against Airbnb in Union City, but I still see a bunch of them so my guess is it's hard to enforce? The only way they can track you down is if you're reported, and I figure not a lot of people in Union City do that?

Also, the 3 unit I'm looking at might fall through, so I'm in the market for some 3 units. However, I've been to a few 2 units with an illegal basement. My understanding is it's illegal if I rent out the basement, but it's not if I stay in there when one of the units is Airbnb'd out, right? I don't think the Airbnb guests will report, but I'm technically not renting out the illegal unit, I'm allowed to crash there no?

I guess it’s all risk verse reward.  Dealing with the city is not fun - speaking from experience... they eventually catch up with you which is unfortunate.  I’m currently dealing with a squatter who a tenant allowed to stay on their couch and then couldn’t get rid of.  He moved out and she said she’s not leaving without a court order....how’s that for a response to who are you and what are you doing in my house!!! She already called building department, health department and made false claims so she can stay and not pay rent.  Imagine this happens and you just so happen to have an apartment not registered.  Luckily I do not but the point is when you have people in your home the amount of control you have is greatly reduced and sometimes sh1t happens.  Just saying :)

Totally agree @MIchael G. , I'm sorry to hear about the complication and that sounds absolutely horrible, but you bring up great points. Yeah for the basements I was looking at, I'd be the only ones staying so no issues with the tenants there :) But moreover, those issues are why Airbnb is so appealing. Not having to deal with long lived tenants and having a platform for them to be vetted out. 

Airbnb's pretty good at not handing over data to governments, and so it's pretty hard to crack down in my experience unless the city is very very vigilant and able to expend resources and if neighbors start reporting.  Something tells me that the city and neighborhood demographics are not such that this will be a huge problem (it's normally more of an issue in white, affluent areas), but you're right, it's risk and reward. I think the fine is like $250 each time they catch you so it's not a big deal. Thanks for all the help!

@MIchael G.  I too am sorry to hear about your fiasco w/ the squatter. While this hasn't happened to me, I've certainly had my share of problem tenants. Just curious what you learned from this debacle and how you would prevent this from happening going forward? I only ask in hopes that anyone viewing this post could learn from your experience.

@Marc Weisi - Thanks for the thoughts.  I can only say I am lucky that I have a No Subletting clause in my lease and I just expanded upon it.  Ultimately, unless you are in the apartment all the time; which you wouldn't be, how are you going to know someone on the couch has an evil agenda - to not pay rent and stay as long as you can.

I have already taken steps that will be the new protocol going forward.

1) Tighten up the lease and add additional emphasis on the NO SUBLETTING clause.  Also make it clear to prospective tenants.

SUB-LET: Resident may not sub-let the Premises or assign this Lease without the prior written consent of Management. Resident(s) shall not assign this Agreement, or sublet or grant any license to use the Premises or any part thereof without the prior written consent of Landlord. Consent by Landlord to one such assignment, subletting or license shall not be deemed to be a consent to any subsequent assignment, subletting or license. An assignment, subletting or license without the prior written consent of Landlord or an assignment or subletting by operation of law shall be absolutely null and void and shall, at Landlord’s option, terminate this Agreement and start the eviction process of all Resident(s) and occupants.

If subletting is approved by the Landlord, a one-time fee of THREE HUNDRED DOLLARS ($300.00) PER SUBLET, is assigned to the lease. All subletting individuals are required to submit an application to the Landlord for evaluation and screening. Landlord reserves the right to reject any sublessee that does qualify. If any sublets are initiated by Resident(s) without the prior written consent of the Landlord, for each individual sublet, Resident(s) will be assigned and responsible for the subletting fee, for each sublet, spanning the entire term of this Agreement.

2) I use tenant cloud which is free and awesome in ensuring all documentation is in one place and easily available in the event an eviction is required.  They even allow you to send via email all late notices, etc.  Really happy about that software right now.

3) I tried cash for keys, but I only offered 1,000...in hindsight, I would've offered 3,000 to start now as she may have taken that and between time and cost, 3000 is better then 3 months of no income, lawyer fees, my time, etc.  Lets be realistic.  An eviction can cause - at least in my case almost 10,000 - 13,000 in lost rent, legal, damage to apartment, etc.  I am still in court because this scumbag keeps adjourning, holiday breaks in the court, etc.

4) Spend more time in court - I think a big part of the problem is that I did not know what to expect, and was nervous about the situation.  Sitting there for one day opened my eyes as I did not see the evil landlords, but good guy landlords that gave a deadbeat a break and then they took advantage of that persons generosity.  I also saw those that think they can do this on their own make stupid mistakes and suffer for it in the court.  There are a lot of evil people out there and you are just a means to their end of free rent.

5) Accept that you have NO power.  yeah you can send notices, drive prices, but at the end of the day, you own a liability that will not always be a resource.  That being said, its all part of the game and even if you do everything right, you cannot always determine peoples actions and how they will impact you.

6) I increased my insurance rather then paying for the cheap coverage.  again people are capable of doing anything.  When you have a liability - treat it as such and cover yourself as best you can for the unexpected.

Beyond that...I wish prices were cheaper so I could get another good cash positive property :) 

Hope that helps!  Good luck everyone!  Ill come back when I get back from court next week....

Thanks @MIchael G.  I'm going to try that software and I appreciate your thoughts on the matter. Good luck and keep fighting the good fight!

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