Rental opportunities in Elizabeth NJ?

Question

Hi all,

I have read here that places like Newark, Elizabeth and Linden are good cash flow opportunities in NJ. I'm a bit afraid of investing in Newark, but I'm willing to take the risk if it pays off. My sister-in-law just moved to Elizabeth near Linden, around Grier Avenue and Bayway Avenue. I visited the area and walked around the neighborhood. It is very nice, but I noticed that there are many houses in foreclosure, abandoned, and several vacant apartments.  Is this a good or bad sign to invest?

Also, rent is very low in comparison to NYC. my sister-in-law is paying $1000 for a two bedroom with 2 parking lots and a backyard. We also knew about other 3 bedroom houses renting for $1200, and $1500, with backyard and parking lot. I really like the area and  it is relatively close to NYC. We spoke with several locals and knew of a few people who live in the neighborhood and commute to NYC every day. This is a very important factor to me because the neighborhood is close to public transportation. The locals also told us that the neighborhood is very quite, and peaceful. Does anybody have experience investing in this area? could this be a good area to start my investing career?

Thank you advance.

Chris Daliani · Answer

@Melaines Gil Have you found out any additional info about investing in Elizabeth and Newark? I to am interested in these areas.

Thanks

Charles Worth · Answer

@Melaines Gil

I was just using Homes.com. I normally use MLS listing from my broker or one of the listing sites like homes.com.

They may be good for cash flow but just make sure you account for all the costs. Many bad areas appear to have good cash flow until you factor in higher vacancy, higher tenant costs because they do not treat the property well, etc.

Melaines Gil · Answer

@Edward Hall

Thank you very much for defining PMI. I don't plan to put less than 20% on a down payment. And talking about FHA loans, don't you have to live in the property for at least a year to get qualified for this type of loan?

Melaines Gil · Answer

@Charles Worth

Yes, those prices seem to be very high to me. That why I said i don't trust Trulia. I don't know the area either, and I have heard the same things you've heard about Elizabeth. However, I have read in the posts here that it could be a good area to buy for cash flow not appreciation. And that is what I'm looking to do. Where do you check the prices of these two properties? Do you know where I can find more information about the neighborhood? I'm not familiar with public records websites.

Thank you very much for your great insight.

Edward Hall · Answer

That 500K+ number for Elizabeth does seem very high. If I had to guess I would say between 175-275 would be a decent price point to look into for investment purposes in that area. I would do A LOT A LOT of due dillegence before I purchased ANYTHING in Elizabeth for 500K.

Regarding neighborhoods and tenant hassle factor, I would say Elizabeth is a step above Newark, but right behind Linden But of course this can be broken down neighborhood to neighborhood.

GOOD LUCK!

and PMI (private mortgage insurance) is insurance you pay on top of your mortgage when your down payment is  less than 20%. It helps the lender in the event you default on your mortgage. This is a popular consideration with FHA buyers. PMI fees are depending on the size of the down payment and your credit score, from around 0.3 percent to about 1.5 percent of the original loan amount per year.

Charles Worth · Answer

@Melaines Gil

That sounds really high for that area. Not saying those houses and prices don't exist they do but most houses are probably about half that for a duplex. For instance, just a quick search (and I did not verify the duplex status etc.) shows two random properties at about the price I stated:

28 Prospect Street, Elizabeth NJ, 07201

550 Grier Ave, Elizabeth NJ, 07202

I have never known Elizabeth to be a great area so I would also look at schools, demographics, jobs and overall crime. One persons quiet and nice might be another persons not so nice. With that being said there are definitely opportunities in these commuter towns and many like this have been on the upswing.

Melaines Gil · Answer

Hi John,

I looked in Trulia, and the home prices in Elizabeth are starting from $400K. The majority of them are $500K+. Surprisingly, almost all the houses listed in Trulia are in foreclosure. Also, according to Trulia the property taxes could be as high as $15K. That's way too much. I would like to know where can I find all the information you suggested me? I don't trust Trulia that much. And what is PMI?

John C S. · Answer

Hi what is the average price of a tipical home there. Also what are the taxes. Look at public records many you can find out why so many houses are being foreclosed on. What year were they bought and are they FHA loans. At the time when people were paying a high PMI. PMI pulse tax hikes would put home owners into foreclosure. Good luck keep us posted.