Opportunity in the Newark area?

18 Replies

Has anyone looked into the Newark area? Seems like a decent area to invest in. Here's a house that just came on the market:

2FH, 2BR 2BATH in one unit, 2BR 1BATH in other unit

asking price: $89K

purchase price: $71,200

down payment: $14,240

closing: $2,136

repairs: $10,000

total OOP: $26,376

Monthly Cost

PITI: $837

vacancy: $250

maintenance: $250

capEx: $125

Total monthly cost: $1462

monthly rent: $2100

monthly cash flow: $638

CoC: 7656 / 26376 = 29%

Does this seem too good to be true? Is $10K a ridiculously low estimate? I haven't had a home inspection yet.

Well, it definitely depends on the condition of the property. Did you take a walk through the property yet and are you familiar with estimating home repairs? Also just asking out of curiosity, how did you come up with 10K as the repair costs?

Hi @Noel Challenger ,

Thanks for the response. The $10K repair cost estimate is admittedly a best guess, assuming the property right now is in fair condition with no major repairs (e.g. new roof) needed. I haven't had an inspection yet and haven't walked through the property. You can consider this analysis a best-case scenario even.

I suppose if the numbers seem favorable, then the next step would be to look at the property with the listing agent.

Newark is on the up. Some neighborhoods are super hot with prices that don't make sense for rentals. You may also want to look at Harrison, North Arlington and some of the other towns that border Newark. Amazon announced today that Newark is on the shortlist for HQ2, so i think we can expect prices and rents to continue growing at a good clip, even if Amazon doesn't pan out.

I would asume $10k in repairs for something that’s very close to turnkey. Currently in Newark, any property going for less than 300k is going to need a lot more in repairs than $10k. Even in the roughest of neighborhoods ( or perhaps, especially in the roughest of neighborhoods).

An other question is: is the investment worth it? I really think that Newark will continue to have strong appreciation particularly around the train stations and its better wards (East, and lot of the Central and the North). Competition here is strong, particularly from cash buyers. If you manage to find an ok multi family in an ok area for a reasonable price, you won’t go wrong. Now if Amazon comes here... we’ll, just imagine.

hi Don. Looks like a great deal. Hope your inspection works out well. If I can ask as a noob... How do you source a deal this good? Is this MLS or do you use a different ways?

Hey @Darren Cho , I just check the usual sites - zillow, trulia, realtor.com, and redfin. This one I saw on zillow. But I want to stress that I'm not convinced this is a good deal, mostly because 1) $10K in repairs sounds like it's a big underestimation, and to a lesser degree 2) it's not a great area so the tenants may not be great.

Hi @Michelle Clark - just the publicly available stuff: https://www.zillow.com/homes/for_sale/Newark-NJ/fsba,fsbo,new_lt/house,condo,apartment_duplex,townhouse_type/38699650_zpid/12970_rid/40.831865,-74.022446,40.630499,-74.341393_rect/11_zm/2_p/

@Don C. there's opportunity in Newark for sure. But there's also rent control and let's say more challenging situations to deal with for a newer investor.  As a seasoned investor myself of 20 years, Newark always seems like place where newer investors want to put their money in locally because of the higher returns.  However I personally believe that you need to understand the marketplace and have years under your belt before venturing in.  

Newark is definitely on the way up, finally.  I think that I'll see the city in all of it's former glory at some point in the future.  Before that can happen though my beliefs are that they need to make it worthwhile for the small investor and not just the big institutional investors who are changing the landscape.  It needs to be done block by block.  And in my opinion the rules are still stacked against the newer investor in the marketplace.  The seasoned investor, with systems in place and economies of scale already set & ready to go, will have a much better go at it.  

Hi,

I am a licensed NJ Home inspector, licensed GC and construction manager. Call me and I shall help you, if you still need 

Thanks

Vijay K Chopra

It might still make a decent buy-and-hold  depending on your experience level with rehabbing and the location of the property .  I was just commenting that $10,000 of rehab work seemed very unrealistic.

I know this does not relate to the topic of discussion. but Im new here and i really want to get into real estate investing and i am looking for someone in hamilton or Trenton, NJ who could guide me. I am still reading and getting to understand real estate investing but the information i gathered seems to have a lot of loopholes.. Please help me

Newark is a tough city to start but as the largest city in NJ there are lots of opportunities. Doing business here is not easy, but if you have the right understanding of the area its a great place to invest. There is a wide range of people and backgrounds and the city is constantly changing and can be block by block in certain areas for where you might invest and might not want to invest. Additionally if you have a very small portfolio you may not be able to find qualified management in most sections of the city. 

We have dealt with all kinds of issues, many of which I never expected to see as a real estate investor, but have also made solid returns after a STEEP learning curve. Keep in mind that returns in real life may not be as high as on paper due to extra high repairs/ maintenance issues (I don't know why but more stuff seems to go wrong and break here then properties I have in other areas), challenging management, and high rates of evictions. 

 I have millions of dollars invested in the hood and have made strong returns, I am actively looking for more deals in the city (please send them my way), but I have a management team, maintenance team, as well as systems and processes for doing business in Newark. 

I would not suggest a first time buyer with no management experience jump in to the game here but if you can make it work here you have probably learned from trial by fire. 

I saw a lot of great properties (by great I mean destroyed) on the west area of Newark, but as far from what I've read, it's probably one of the most violent areas of Newark. I guess these neighborhoods would take much more time to see the gentrification coming in correct?