Investor · New York, NY · Member since 2012 · 67 posts · 4 votes
Hi, I'm looking at a 3 family home in Bergen County, NJ that doesn't require much in repairs ($5000 or less).
The strategy here is to buy the place and increase the rents. Currently the tenants are renting month-to-month for about $900 to $1000, whereas, I should be able to get $1200 for each unit, since they are all 2 br, 1 bth.
My questions are:
1) How can I find out if there are rent control laws for the place?
2) If they are unhappy with the rent increase but give me a hard time vacating the unit, how difficult will it be to get tenants to leave?
Real Estate Agent · Hackensack, NJ · Member since 2014 · 321 posts · 412 votes
10y
No problem, good luck! Depending on what town and the size/condition of the apartment, you might be able to get more than $1200 a month for a 2 bedroom with the lack of available rentals on the market currently.
Investor · New York, NY · Member since 2012 · 67 posts · 4 votes
10y
Dear BP Community,
I am about to close on a 3-family place in Kearny, in Northern New Jersey and I need your advice. The current tenants are on a month to month lease and I'm planning to raise the rent $300-$400. The seller says he will give notice to the tenants as soon as we go through legal review and I put down my earnest deposit, but it's no guarantee the tenants will be out by the time I close. This means if the tenants give me a hard time in leaving, I will be stuck with the eviction process.
Is that too much risk to take on? How long does it take on average to evict tenants in NJ? Is there any way to protect myself now if they damage the property before leaving?
Besides leaving the deal on the table, what other options do I have?
Monmouth Junction, NJ · Member since 2014 · 14 posts · 2 votes
10y
Hey Henry,
Good Luck on your closing, it sounds very exciting!
Like Kevin explained earlier, you can change the current month to month tenants into 6 month or 12 month tenants as long as you issue them the Notice to quite and Notice to Increase rent.
Before buying the property I would ask the seller for 12-24month history on the current tenants. Even though they are month to month the Seller should be able to provide information on how they pay and if they pay on time or not.
This will save you a lot of time and heartache before you close on a property with really bad tenants.
If you do have to go through with a eviction, it takes anywhere from 6months to 1yr. The best way, may be the cash for keys method.
Investor · Westwood, NJ · Member since 2013 · 14 posts · 8 votes
10y
If you feel that there is too much risk associated with inheriting the tenants, negotiate that the units be vacant upon close. If I was in a position where I could either inherit tenants, or start from scratch by only renting to new tenants who meet my standards, I would take the new tenants any day of the week.
I believe in NJ, the law requires the tenants are given 60 days notice.
This can, and should be done during attorney review. If you are trying to close sooner than 60 days, you might be out of luck.
Good Luck on your closing, it sounds very exciting!
Like Kevin explained earlier, you can change the current month to month tenants into 6 month or 12 month tenants as long as you issue them the Notice to quite and Notice to Increase rent.
Before buying the property I would ask the seller for 12-24month history on the current tenants. Even though they are month to month the Seller should be able to provide information on how they pay and if they pay on time or not.
This will save you a lot of time and heartache before you close on a property with really bad tenants.
If you do have to go through with a eviction, it takes anywhere from 6months to 1yr. The best way, may be the cash for keys method.
Thanks for your thoughts Khurram.
That's a good idea to ask the current seller about the tenants -- I didn't know I could do that or if they would be honest.
Good Luck on your closing, it sounds very exciting!
Like Kevin explained earlier, you can change the current month to month tenants into 6 month or 12 month tenants as long as you issue them the Notice to quite and Notice to Increase rent.
Before buying the property I would ask the seller for 12-24month history on the current tenants. Even though they are month to month the Seller should be able to provide information on how they pay and if they pay on time or not.
This will save you a lot of time and heartache before you close on a property with really bad tenants.
If you do have to go through with a eviction, it takes anywhere from 6months to 1yr. The best way, may be the cash for keys method.
Thanks for your thoughts Khurram.
That's a good idea to ask the current seller about the tenants -- I didn't know I could do that or if they would be honest.
If you feel that there is too much risk associated with inheriting the tenants, negotiate that the units be vacant upon close. If I was in a position where I could either inherit tenants, or start from scratch by only renting to new tenants who meet my standards, I would take the new tenants any day of the week.
I believe in NJ, the law requires the tenants are given 60 days notice.
This can, and should be done during attorney review. If you are trying to close sooner than 60 days, you might be out of luck.
Thanks, John Papa. I will check the 60 days notice thing.
In the state of New Jersey the law favors to the tenant regarding when the tenancy will end.
Meaning as a landlord you must offer the tenant a renewal at the end of lease expiration unless the tenant has violated the terms of the lease.
You can increase the rent a reasonable amount. This reasonable amount should be no more than 10%. If you try to raise it more the tenant can hire a tenant advocate and the court will likely side with them.
If I were you as part of your business plan I would plan on increasing the rents up to approximately 10% a year until you reach your target amount.
If you insist on receiving the property vacant then make it as part of the deal, meaning have the seller deliver the property to you vacant.
Also in the state of New Jersey if you are to evict a tenant and you own the property in an LLC then you must hire an attorney to handle the process for you. Otherwise if you own it in your name you may handle the eviction directly as the owner.
You of course should talk with your attorney about all of this.
Real Estate Agent · Hackensack, NJ · Member since 2014 · 321 posts · 412 votes
10y
One other idea, you could do what banks do when they have a tenant in a foreclosed property, offer cash for keys. Negotiate an amount that could help them with their moving costs. It could be a lot cheaper in the long run than going through the eviction process. New Jersey is very tenant friendly, so avoid the courts if you can.
In the state of New Jersey the law favors to the tenant regarding when the tenancy will end.
Meaning as a landlord you must offer the tenant a renewal at the end of lease expiration unless the tenant has violated the terms of the lease.
You can increase the rent a reasonable amount. This reasonable amount should be no more than 10%. If you try to raise it more the tenant can hire a tenant advocate and the court will likely side with them.
If I were you as part of your business plan I would plan on increasing the rents up to approximately 10% a year until you reach your target amount.
If you insist on receiving the property vacant then make it as part of the deal, meaning have the seller deliver the property to you vacant.
Also in the state of New Jersey if you are to evict a tenant and you own the property in an LLC then you must hire an attorney to handle the process for you. Otherwise if you own it in your name you may handle the eviction directly as the owner.
You of course should talk with your attorney about all of this.
Wow, this 10% rule sounds like rent control. This is going to be a tough decision. The place was going to be $300K for $3600/month in rent. With the 10% rule, it would be $300K for $3000/month with a big possible headache in tenant evictions.
One other idea, you could do what banks do when they have a tenant in a foreclosed property, offer cash for keys. Negotiate an amount that could help them with their moving costs. It could be a lot cheaper in the long run than going through the eviction process. New Jersey is very tenant friendly, so avoid the courts if you can.
How much do people normally offer when they do cash for keys?
Monmouth Junction, NJ · Member since 2014 · 14 posts · 2 votes
10y
I think the $300-$500 range is more suitable for your area. I would however strongly ask the seller for tenant history. This will really help you make up your mind about the property and negotiating keeping the tenants or having the current owner evicting them.
Investor · New York, NY · Member since 2012 · 67 posts · 4 votes
10y
BP Community -- I would really appreciate your advice. I'll be making the go / no-go decision on this deal tonight.
So I spoke with my attorney, and he says I can write up and give the future leases to the seller to give to the current tenants (increasing rent from $900 to $1200).
So there are 4 scenarios:
1) The tenants may just leave once they receive that.
2) However, they may decide to stay, not re-sign the lease, and not pay the rent. Then I would have to go through the eviction process. Worst scenario he says tenants will be out by February, but most likely Jan 1.
3) Or the tenants may decide to fight against the increase, saying that it's an unconscionable increase. The attorney there said that in Bergen County, 4% is the highest he's seen approved by a judge. The property is in Hudson County, and he said a judge might go 5% or 6% there. However, he said before then, it's really a negotiation between landlord and tenant.
4) Cash for keys, as Khurram and Kevin mention.
According to the 50% rule, the monthly rent is $2860, and after expenses, my monthly CF is $314. However, per the rental calculator, my monthly CF is -$216.
Using the 1% rule, I would've been way over 1% if I'm able to get new tenants ($3600/month). But if I can only raise the rent by 4% (conservative estimate), then I'm just under the 1% rule.
Right now, I'm learning towards doing the deal, as I'm sure I won't be using a property management company for a while (8% of estimates) and once I do, I probably will have been able to raise my rents to their full potential. I also don't have any other properties right now, so I think I would reap a lot in the tax benefits.
Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
10y
Check with the community where the property is located. Each town has their own version of rent control/vacancy decontrol laws. And some towns don't have any rent control laws. Which town is the property located in?
Check with the community where the property is located. Each town has their own version of rent control/vacancy decontrol laws. And some towns don't have any rent control laws. Which town is the property located in?
Thanks, Judy. It's in Kearny, NJ. I checked with the town, and they don't have rent control. However, New Jersey overall has a tenant law against "unconscionable rent increases." I asked my attorney what's unconscionable, and he said a judge in Bergen County told him "more than 4%." However, the attorney thinks I could do 6% in Hudson County.
Investor · New York, NY · Member since 2012 · 67 posts · 4 votes
10y
This is in Kearny where they don't have rent control. However, I spoke with my attorney, and he said there is a NJ tenant law where you cannot make an "unconscionable increase" on the rent, and that a judge in Bergen County thought over 4% was unconscionable, but perhaps I could go higher in Hudson County.
Investor · Newark, NJ · Member since 2014 · 119 posts · 18 votes
10y
@Henry L. I'm also in the same position as you I'm planning on using a FHA or possibly 203k loan for my first purchase but I worry that you might be over paying for this property just by the numbers you gave. I know Kearny very well I understand it's close to the track and bulls stadium granted the subject property is closed to harrison. but what ever you decide to do please let us know I'm curious of you decision