Questions about Greater NYC/NJ Rental Market

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Questions about Greater NYC/NJ Rental Market

Jen Boyd
Nanuet, NY · Member since 2016 · 17 posts · 12 votes

I have been looking into buy & hold investing in the greater NYC area of NJ, primarily Hudson, Essex, and Bergen counties and I've come up with a few questions. I'm trying to understand what motivates people to move and rent in certain areas.

1. Has any one had any success landlording with multifamily homes in Bloomfield, NJ (or places like it - i.e. cheaper railroad stop towns) and had a positive experience and good tenants? Would you recommend this area to live and/or invest? I'm having trouble figuring out the demographic that would want to rent in Bloomfield. I figure most young people would try to live somewhere in Montclair as opposed to a more suburban place like Bloomfield, and young couples would want to BUY a starter home there since the houses are a bit cheaper and its a suburb, but its not really a place for long-term families because the schools aren't great.... so who is renting there? Let me know your thoughts.

2. Do you feel that a lot of people rent single family homes in the greater NYC area? Maybe I am just unfamiliar with it but I always see apartments for rent, very rarely do I see whole single family homes. Is it because it doesn't cash flow to rent a whole house in this area? Or is it because people don't want to rent by the time they can afford to pay for the rent in a single family home? Or am I living under a rock and everyone is renting SFR's right under my nose?

Thanks for your insights.

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Jeff Stewart
Woodcliff Lake, NJ · Member since 2014 · 37 posts · 28 votes
10y

Jen,

I'm also a North Jersey investor. My focus is on fix and flip, so take what I say with a grain of salt; I'm not an expert by any stretch. But based on what I see in Bloomfield, I'd be stunned if you ever found a single-family that met the famed 2% rule. Even 1% would be very difficult. In flippers' terms, a fully renovated 3/2 is generally $325-425k. You could probably find a 3/2 in decent condition for something like $250-275k, but I doubt you could get $2500-2750 in rent. I would think you'd have to be buying at a pretty deep discount to make the numbers work.  

That's just what I've seen. As I said, I'm definitely no expert in buy and hold. Good luck!

Jeff

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  • Jeff Stewart
    Woodcliff Lake, NJ · Member since 2014 · 37 posts · 28 votes
    10y

    Jen,

    I'm also a North Jersey investor. My focus is on fix and flip, so take what I say with a grain of salt; I'm not an expert by any stretch. But based on what I see in Bloomfield, I'd be stunned if you ever found a single-family that met the famed 2% rule. Even 1% would be very difficult. In flippers' terms, a fully renovated 3/2 is generally $325-425k. You could probably find a 3/2 in decent condition for something like $250-275k, but I doubt you could get $2500-2750 in rent. I would think you'd have to be buying at a pretty deep discount to make the numbers work.  

    That's just what I've seen. As I said, I'm definitely no expert in buy and hold. Good luck!

    Jeff

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  • Brian Spatz
    Fair Lawn, NJ · Member since 2015 · 32 posts · 10 votes
    10y

    There are more single-family homes being rented in this area than most people will realize, though not to say that it's a substantial percentage of an average town's real estate make-up. In a metro area like the suburbs of New York, there are numerous families that aren't in a position to own yet, or aren't looking to buy and commit to an unfamiliar area without experiencing it. Generally speaking, these families can easily become multi-year tenants and are attracted to safe areas with better schools, access to transportation, and other amenities not available to them in urban areas (backyard, parks, town pool, etc.)

    In my town of Fair Lawn (Bergen County) there were 74 houses leased through the MLS in the last 12 months, with another 10 listed right now. May seem like a small number (this only reflects the town's SFR, not condos or apts) but if you consider the larger market of FRBO, and the countless number of long-term ongoing rentals that don't come back on the market for years at a time, the total number of rental homes is exponentially greater.

    The biggest struggle for a leverage investor is making sure the PITI is covered with enough left over to keep a solid capex reserve. Remember, there's only one stream of income to cover it all, and any size roof costs the same to replace whether its a 1fam or 4fam. You'll often compete with all-cash investors who are simply looking for a specific monthly income, as opposed to an actual rate of return.

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  • Kevin Hill
    Real Estate Agent · Hackensack, NJ · Member since 2014 · 321 posts · 412 votes
    10y

    Hi Jen, I have a client in Belleville how has an investment property there. Its a comparable town to parts of Bloomfield. It was within walking distance of the light rail to Newark Penn Station. We listed his one apartment above what typical 2 bedrooms were going for in the area, as he probably over improved the apartment for what's typical in the area. It rented very quickly. Out of the prospective tenants, 2 were young doctors who were doing a residency in the area. The accepted tenant had one small child and was relocating from upstate New York. Like you said, schools aren't the greatest. You'll likely attract young couple without kids or too young for public school yet.

    There is currently a rental shortage in Bergen County, due to the lack of available house rentals. The house rentals typically go quickly if priced right. Many renters are new to the area, relocated for a job, sold off their home & are now renting etc. You typically get renters with good income & credit depending on the town. Many people rent a house first, then buy. Some towns like Tenafly, Old Tappan, Ridgewood etc might be too expensive for someone to buy in, but will rent instead due to the high reputation of the school systems.

    It is difficult to find a single family home that will cash flow. When the market was slow, I did see some investors renovating and renting for a few years until there was some appreciation in the house. But you can't always count on the home appreciating.

    Hope this helps!

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  • Allan Szlafrok
    Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes
    10y

    Im an active investor in northern nj and SFRs dont make sense for a buy and hold investor. In fact flipping SFRs is hard too because of the taxes. I would recommend buying and holding duplexes or renting out one unit in a duplex to cover your expenses while you flip the duplex. Otherwise youll drown pretty quick.

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  • Jen Boyd
    OP
    Nanuet, NY · Member since 2016 · 17 posts · 12 votes
    10y

    @Jeff Stewart this is what I figured. Thanks for your insight.

    @Allan Szlafrok I'm surprised by what you said, I would think that in an area with very high property values, flipping SFR's is the most effective business model. Certainly you have to factor in high holding costs, but there are bound to be deeply discounted properties in need of rehab that flip well? I feel (and this is completely my opinion) that there are a LOT of flippers in this area for that exact reason. What is your strategy? Buy & hold duplexes like you said?

    @Brian Spatz - Makes sense that people would want to rent an SFR in a good school district location but like you said, a roof is a roof and costs almost as much for 1 fam as 4 fam and taxes are high. I don't know how the numbers can possibly work. I also don't understand the concept of spending $300k cash to get back $1,000/month, less all the cap ex over the years... can you explain why someone would be willing to do that? Are they just hoping for 3% appreciation? Seems like a crappy/risky ROI to me.

    @Kevin Hill - Thanks for the insight. I guess there is potential for good tenants in areas like Belleville and Bloomfield, good to know... And regarding towns that have high prices but good schools, this is exactly what I imagined is the case - I would expect that it is easy to find renters willing to pay a lot of money in good school districts, but whether an SFR would really cashflow, even in an area like that, is definitely questionable.

    Thanks everyone for your responses I really appreciate your help and insight

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  • Allan Szlafrok
    Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes
    10y

    I by and hold and flip both. Its just hard to find qualified buyers in some of these areas i have alot of sale contracts fall out. Its just a  safer strategy i find. There are plenty of discounted properties. Ive flipped SFRs before but dont forget alot of buyers need that rental income form the other unit to make it work for them. Otherwise they cant pay their mortgage.

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  • Kevin Hill
    Real Estate Agent · Hackensack, NJ · Member since 2014 · 321 posts · 412 votes
    10y

    @Jen Boyd welcome! If you need me to run any stats like average/median rent prices in Bergen County, let me know!

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  • Vincent Priore
    Investor · Wyckoff, NJ · Member since 2015 · 100 posts · 35 votes
    10y

    @Jen Boyd I have two multi-families in Bloomfield and will echo what @Kevin Hill said.  I've had no issues renting and find that the tenants I have are well qualified with very solid income.  There are certain parts of the town I would steer clear of, but overall, its great for rentals.  Taxes are very high in all of Essex County, make sure you buy right and do your homework on rents.

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  • Jen Boyd
    OP
    Nanuet, NY · Member since 2016 · 17 posts · 12 votes
    10y

    Thanks @Vincent Priore, which areas of Bloomfield would you avoid?

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  • Brian Spatz
    Fair Lawn, NJ · Member since 2015 · 32 posts · 10 votes
    10y

    For those who have cash sitting in a bank earning a negative return vs inflation, buying something now and sitting on it can give them regular monthly income, most of which would be written off by the tax advantages of rental properties. Of course we can't always assume appreciation, however many of these investors have seen the power of hanging onto something for 30+ years in a stable area like where we live.

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