Best areas for rental properties in NJ

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Best areas for rental properties in NJ

Abdul R.
Real Estate Investor · Piscataway, NJ · Member since 2012 · 167 posts · 19 votes

Looking for opinion/advise of an experienced investor who know NJ and the tri-state very well. What area in NJ are best for holding rental properties. I picked NJ is because I live there. I am thinking/hoping to buy a property or two every year for positive cash flow. Any general tips is also welcome. I am new and never been a landlord. I have read BP, a couple of good books and now ready to invest.

Thanks,
Abdul

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Robert S.
Contractor · Milltown, NJ · Member since 2016 · 297 posts · 213 votes
9y
Oh boy, what a topic to discuss. Where to begin... New Jersey happens to fall in to the #1 or #2 spot for the richest state in the nation over the past several years, using per capital household income as the metric. This means you are dealing with a very educated homebuyer. NYC is the largest populated city by far in America, nearly doubling the second most populated city. Its workforce consists of the cream of the crop in its businesses. NJ/CT/Long Island are the suburban byproducts of this great city. NYC is the financial hub for America, therefore how long do you think it would take for all of the Ivy League financial geniuses and their underlings working in NYC to realize not only could they make megamoney while at work, but they could also make money(via a compounding equity build) while house hacking a multi-family in the suburbs while they merely live there? Post-housing crisis answer, not very long. So, now that the real estate investing population has flooded the NJ mls realtors with "show me houses that cash flow positive" requests, the end result is, a flood of buyers more than willing to househack a property that the rent may barely cover the owner's property taxes and utilities. This creates a supply shortage, and followed by an increase in asset price. In previous decades, '60's, '70's, '80's, '90's, NJ duplex owners would live rent free, in nice neighborhoods while their renters covered their housing expenses. Clearly not the case anymore. Unfortunately, unless you don't mind living in an extremely undesirable area, the opportunity just isn't there on the mls. Distressed multi-family properties in nice areas get sold very quickly, and the ones in really nice areas certainly are nowhere near entry level prices. The general consensus in finding multi-family properties at an entry level price point, is go to a state that ranks in the 20's for per capita household income, i.e. - North Carolina. You can find significantly cheaper housing, lower property taxes, with a lower educated population (not my opinion, these are government statistics). IMHO, competing with NJ's owner occupied buying population that is willing to overpay just to get a multi-family property will lead any investor down a disappointing road. The NJ owner-occupied multi-family homebuyer is looking at multi-families in nice areas as a means to build up more equity over time, whereas straight up investors are looking for investment grade positive cash flow, these are two very different concepts. Hope this helps shed some light on the topic at hand.
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  • Carlos Araujo
    New York city, NY · Member since 2016 · 18 posts · 1 vote
    9y
    Hey it's great to hear that people are looking in New Jersey, I live in Staten Island and the cheapest homes start at 400k. Right over the bridge in jersey I found homes around 80-150k for 1 or 2 family homes, from the looks of it they are good to start but yes the area is not the best. Im looking at a 3 family home in Newark for 160k it looks like it needs very little work I'm going with my realtor at the end of this week to go check it out. It brings in 2.5k a month for rent each month. It would be great if I could get some experience feedback. My plan is to put down 20% on it and mortgage the rest and rent it out and do work little by little over the next 6-7 months and try to refinance it.
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  • Drew Slew
    Rental Property Investor · Union city, NJ · Member since 2016 · 203 posts · 43 votes
    9y

    im interested in the newark, union city, jersey city areas as well. i think there are good rental investments

    1Reply
  • Eric P.
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    9y

    I'm in NJ and though I haven't pulled the trigger just yet, pickins do seem kinda slim compared to what I read on these types of forums. To get something in a "not-bad area" not even a good area, just not that bad.. You're looking at over $175k for something turn key, but still not great. Taxes are a killer.. $140k homes that need lots of work that appraise at $210k fixed up have taxes close to $7k in most counties. From what I've seen the best way to cashflow anything significant in NJ is to find something that has a lot of surface work needed, nothing major, just basic upgrades. Know how to do it yourself and have friends or family willing to lend a hand for pizza and beer. Know how to make a bathroom look like a $5,000 job for $500. Find deals on hardwood at your local habitat for humanity or building materials auction and have your crazy but handy uncle put them in for you. Maybe you're into the house for $5,000 in repairs but it looks like you did $40k. Then maybe you can get an ROI of 15% on your initial cash layout. But I have no idea how you get close to the 2% mark in NJ unless you get very lucky and something lands in your lap.

    I'm very tempted to go over the bridge and start looking in either PA or DE as I'm in South Jersey.    

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  • Vincent Priore
    Investor · Wyckoff, NJ · Member since 2015 · 100 posts · 35 votes
    9y

    I've found that there are very, very few "investor friendly" realtors out there.  Most are trained as sales people to work with a retail buyer.  If you find an agent who is an investor and knows how to find good investment properties, hang on to them.  

    I would recommend doing your own marketing and trying to uncover your own deals.  As others have said, they are out there.  Its hard work and can get daunting, but folks are doing it successfully every day.

    We have bought several bank-owned properties recently in Elizabeth and East Orange.  They require extensive rehab but we are hitting the 2% rule on many once we lease and re-fi out.  

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  • Hiral Lai
    Clifton, NJ · Member since 2016 · 24 posts · 3 votes
    9y

    @ Robert Soto - WOW that was a lot but really great insight and consistent with what I have been thinking about doing recently - looking out of state. I feel like that may come with its own challenges though but I do think it's worth investigating what it would take. Any recommendations on how to start would be great. 

    @ Joseph Scorese - I like the advice on finding a transactional real estate agent, but would love to hear if anyone has any recommendations on who might be good to go with in the Northern NJ area. Or even a recommendation on the best way to find one? Based on Vincent's response, it seems it is not as easy to find these agents.

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  • Gali Niv
    West Orange, NJ · Member since 2016 · 1 post · 0 votes
    9y

    Hi All,

    I am new to real estate (have not yet purchased property) and I am looking to invest in properties in NJ. Either buy and rent out and/or buy and flip.

    I understand NJ taxes are high and therefore I would love to get some insight where are the most recommended areas to invest in for the best ROI.

    Any other tips and recommendations about how to go about buying my first property will be much appreciated! 

    Thanks in advance!

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  • Alek Liskov
    Investor · Clifton, NJ · Member since 2017 · 45 posts · 15 votes
    9y

    @Vincent Priore if you know any good agents - please connect - I am looking for one! And I agree with you that rehab properties are the only way to get close to that 2% rule.

    @Gali Niv you have to do a lot of the research yourself. I've really started liking Realtor.com for their multifamily filter. Although, as anyone in NJ would tell you, MLS deals are not that great or if they are they don't last long. Anyway, do your research. Look at properties. Use the BP calculator to plug in some numbers and see how it works. Have a good pulse on what a 1/2/3BR would rent for in areas. That's how you can start doing a lot of math in your head.

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  • Joel Moran
    New York, NY · Member since 2016 · 23 posts · 5 votes
    8y

    I know this is an old thread but if you are trying to get into the NJ market at a relatively "low" entry point then you will be looking at markets like Newark & Irvington as of 2017. Finding an investor friendly agent would help but they are more worried about selling their $500,000 plus dream homes then helping sell a fixer upper to a potential investor. I submitted a few offers on a couple of foreclosures in Newark but quickly realized that I would have to go way above my price point. I decided to "go west young man" as the NJ market is quickly reaching it's peak, as far as I'm concerned. Take a look at the post above by Robert Soto , he explains it perfectly.

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