I am a new investor (just read a couple of books so far).
I’m in NYC/NJ area (originally from NJ) abd am wondering if this area is too competitive for a beginner?
I hear many people in this region seek investments out of state.
Hi @Rebecca Lane ,
Welcome to the wonderful world of investing in the Northeast! Where prices and taxes are terribly higher than most other parts of the country. With that being said, anyone can get into any business/market with enough tenacity, knowledge and focus. I am a proponent of knowing and starting in your own back yard so the knowledge you learn has a place to anchor in your mind. Each market is going to be different thus the type of deals that can profitably occur will change as well.
To reliably say if an investment in a particular area works you need to know what type of deal to pursue - rentals, flips, wholesales? The second is your target town, zip codes or city. As you probably know areas in NJ vary greatly. Newark is completely different from Bergen County! The same is true for areas in PA.
Pick a town or two in NJ within an hour or so and dive in. Figure out what deals make sense and then compare between those towns-this means being able to analyze deals, crucial skill. Then do the same for the places you wish to investigate in PA. Find some experts from those areas and compare the numbers with them!
Hope this helps!
PA is a great market for cash flow and yield - but not really appreciation. Moreover, the yields that you can find there can be found in NJ. You just need to be more selective and patient. Moreover, those yields will get compressed due to 3rd party property management - just something to keep in mind.
Why not look into NYC though? The city is on sale! You can get reasonable yields (historically high) with lots of equity buffer and future growth.
Why not house hack via FHA in NYC right now. Use a little equity to get a lot in terms of bricks. If you can get a 4 unit and a basement you renovate for yourself, that would be ideal and create major cash flow and equity creation, plus you can easily self manage.
Personally, I am very bullish on New York and NYC itself. Sure it suffered due to COVID, but you want to buy when there is distress. I think all the folks who moved away are already getting bored and already coming back. Plus, the vaccine is getting rolled out which will curb the spread tremendously. Now is the time to buy.
Cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx. The kicker here is that rates are much lower than the 7%. Nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise.
Long term, I think NYC will come back as it always has time and time again. I am also a great believer in investing when there is distress and deploying capital when you can.
If you are looking for yield in the short run, Manhattan may not be for you. However, it is certainly the most attractive it has been in years from a cash flow perspective. If you are seeking out asset accumulation and equity appreciation over the long term then there are certainly fortunes to be made. And there is still plenty of cash flow opportunities in the outer boroughs if you buy right!
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