Weequahic neighborhood Newark NJ property analysis

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Weequahic neighborhood Newark NJ property analysis

Lior Solomon
Investor · Demarest, NJ · Member since 2013 · 78 posts · 29 votes

Hi everyone,

I need your feedback on this property I've found. please bear in mind that:

a. I'm a new investor looking for my first deal.

b. I'm not that familiar with Newark and I need some location feedback as well.

From a quick research I ran it seems that Weequahic neighborhood is an up and coming neighborhood. the safer part of it is between Bergen street and Weequahic park. The property I'm looking at is in the corner of Bergen street and Mapes Ave. Any objections so far?

As for the property analysis:

2 unit, 2500 sq

Purchase price: $179K

Rent roll $34,200

Gross income $31,350

Total expenses $11,920

Net operation income $19,430

Net after mortgage $7,743

Cap rate 9.91%

Cash on Cash 17.44%

I'm going to put a down payment of $44K for the mortgage.

It's a turnkey project, the house is going to be purchased after the house is fully renovated and populated with tenants.

I'm paying 10% for management(same guy that renovates the place will do the PM)

It sounds like something modest to start with, there is a big hospital next by and a police station in the end of the street. it's also a 11 min drive from the Rutgers University.

What's concerns me right now is how do I protect myself from a case where the guy that sells me this turnkey project for some reason can't accomplish the renovation and we already settled for the property price after renovation? I guess only paying the full amount after completion of renovation will do the job, right?

Thanks in advance,

Lior

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Ibrahim Hughes
Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
13y

Here's the deal with Weequahic. Most of the streets between Bergen and the Park (Elizabeth Ave.) are good. However with many of those streets the closer you get to Bergen the more unstable you get as Bergen Street is a bit shaky with some of the characters. All of weequahic is pretty hot right now but anything near Bergen is a bit shaky. I would park on the corner around 2pm on a Sat. and see what you're working with. The best part of weequahic is anything North of the park and West of Lyons Ave. This is the area closest to Hillside.

Regarding the property is this an existing house or a 'newer construction' (built post 2000) 2 family? Those numbers are good if the latter. HOWEVER if not, and you're buying an existing 2 family then your 2500 feet means (I'm making an educated guess) that your property does NOT have a driveway or garage. I'm looking at comps and see that there have been NO 2 family in the last 6 months that does NOT have a drive way or garage that has sold in weequahic AT ALL. NADA. The highest existing 2 family WITH parking sold for $153k. Only newer/new construction, which comes with 2500 sq ft of lot, still comes with any parking at all - and that's for 2 cars. The issue is that those existing 2 families with no parking are hard sells. ESPECIALLY in the South Ward. They have almost no retail resell value and usually only appeal to buy and hold investors at a really low price. So be careful.

Which brings me to my next point and @Erik Pedersen post. I was one of those 5 Investors that capped the fmv of his deal at $55k. Congrats man. However, I still stick to my opinion on valuation and say that if 1 out of 6 investors jumped up $20k in price and down a good amount in repairs then I have to wonder how experienced was he really with Newark and investing in general. But hey the bottom line is that you sold it. And in every market there are some buyers willing to pay a lot more than conventional wisdom. In fact there's a hot market going on right now where 3 families in the south ward of Newark (the worst part with the most crime) are selling to 1st time buyers for $300k+. Unbelievable and pre 2007 Bubble burst all over again. In fact as I was looking at comps for the OP, I saw for the 1st time, a 2 family that fit into the same pattern. I know because the common thread with all of these deals is that the buyer and seller are repped by the same Realtor (my thoughts is that a buyer's realtor who is separate from the seller's Realtor would likely advise his/her client from paying such a high price). So keep it going Erik. I just wouldn't base my business model on that 1 buyer paying more than the rest of the market. Or maybe the rest of the market needs to catch up to that one buyer. That is, I guess, how markets move upwards (unfortunately, towards over inflation {of values} possibly). Either way our job is to ride the wave no matter when or how hard it breaks. Then wait for the right time, swim back out there and ride the next one.

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  • Erik Pedersen
    Bayonne, NJ · Member since 2013 · 90 posts · 27 votes
    13y

    'It's a turnkey project, the house is going to be purchased after the house is fully renovated and populated with tenants.'

    Why and How? How did this part of the deal come about?

    I wholesaled a 2 unit 1800sqft on Bergen street for 75k and 5 of the 6 investors I brought there said the price was too high and guys are paying 55k max on 2 familys. Bear in mind this place needed about 20k in repairs.

    If the tenants will pay you 1425 per month then I think the numbers would work. However 180k for a two family in that area is high no matter what it looks like. There are people on here who know Way more than me about Newark but that is just my two cents.

    0Reply
  • Lior Solomon
    OP
    Investor · Demarest, NJ · Member since 2013 · 78 posts · 29 votes
    13y

    Thanks @Erik Pedersen for the feedback.

    From a quick look I ran on that street it seems that most of the properties on that street are estimated for around $160-165K

    As for the why? if you are asking why going for a turnkey project, then its mostly because I don't have the time/will to do it myself. I don't mind paying some extra money as long as the numbers works for me.

    I do agree with you that $179K is a little high and I am planning to negotiate this.

    Last purchase of this house was for around $100K so I guess the margin the middle man is looking for is a little too high.

    What do you think about the neighborhood?

    Thanks!

    0Reply
  • Ibrahim Hughes
    Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
    13y

    Here's the deal with Weequahic. Most of the streets between Bergen and the Park (Elizabeth Ave.) are good. However with many of those streets the closer you get to Bergen the more unstable you get as Bergen Street is a bit shaky with some of the characters. All of weequahic is pretty hot right now but anything near Bergen is a bit shaky. I would park on the corner around 2pm on a Sat. and see what you're working with. The best part of weequahic is anything North of the park and West of Lyons Ave. This is the area closest to Hillside.

    Regarding the property is this an existing house or a 'newer construction' (built post 2000) 2 family? Those numbers are good if the latter. HOWEVER if not, and you're buying an existing 2 family then your 2500 feet means (I'm making an educated guess) that your property does NOT have a driveway or garage. I'm looking at comps and see that there have been NO 2 family in the last 6 months that does NOT have a drive way or garage that has sold in weequahic AT ALL. NADA. The highest existing 2 family WITH parking sold for $153k. Only newer/new construction, which comes with 2500 sq ft of lot, still comes with any parking at all - and that's for 2 cars. The issue is that those existing 2 families with no parking are hard sells. ESPECIALLY in the South Ward. They have almost no retail resell value and usually only appeal to buy and hold investors at a really low price. So be careful.

    Which brings me to my next point and @Erik Pedersen post. I was one of those 5 Investors that capped the fmv of his deal at $55k. Congrats man. However, I still stick to my opinion on valuation and say that if 1 out of 6 investors jumped up $20k in price and down a good amount in repairs then I have to wonder how experienced was he really with Newark and investing in general. But hey the bottom line is that you sold it. And in every market there are some buyers willing to pay a lot more than conventional wisdom. In fact there's a hot market going on right now where 3 families in the south ward of Newark (the worst part with the most crime) are selling to 1st time buyers for $300k+. Unbelievable and pre 2007 Bubble burst all over again. In fact as I was looking at comps for the OP, I saw for the 1st time, a 2 family that fit into the same pattern. I know because the common thread with all of these deals is that the buyer and seller are repped by the same Realtor (my thoughts is that a buyer's realtor who is separate from the seller's Realtor would likely advise his/her client from paying such a high price). So keep it going Erik. I just wouldn't base my business model on that 1 buyer paying more than the rest of the market. Or maybe the rest of the market needs to catch up to that one buyer. That is, I guess, how markets move upwards (unfortunately, towards over inflation {of values} possibly). Either way our job is to ride the wave no matter when or how hard it breaks. Then wait for the right time, swim back out there and ride the next one.

    2Reply
  • Lior Solomon
    OP
    Investor · Demarest, NJ · Member since 2013 · 78 posts · 29 votes
    13y

    Thank you @Ibrahim Hughes for the the detailed response.

    The house does have a driveway(just for one car) with no garage. and the house was built around 1950.

    I understand that the price is a little high. I'll see if that is something I can change.

    Thanks again,

    Lior

    0Reply
  • Erik Pedersen
    Bayonne, NJ · Member since 2013 · 90 posts · 27 votes
    13y

    @Ibrahim S Such a wealth of Newark knowledge from this guy!!

    Anyway, the guy I sold it to was not very familiar with Newark however he has about 20 rental props + a bar/restaurant in Jersey City so he knows his way around. I just brought up how I had a house for sale for 75k - with rent that will be 1k each and he jumped on it. I also was very up front with him about other people I brought in saying the price was too high, he said he didnt care because he had the cash and the numbers worked + his crew would come in and fix it for cheap and quickly..

    I Cant believe there are houses going for 300k+ around that area right now.

    1Reply
  • Ibrahim Hughes
    Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
    13y

    @Lior Solomon

    - sounds like the house is pretty small then if you have parking on a 25 x 100 lot. Unless it's attached to the house (under the 2nd floor like most of the new construction)?

    If it's NOT attached to the house then I'm also guessing the rooms are small. Thus calculate your rental comps accordingly.

    @Erik Pedersen

    - good job sir. Sounds like a buyer you want to find more properties for. Let me know if he's looking for more 2 fams in the south ward (we come across them but don't have that many buyers for them) and maybe we can partner. Let me know as I may have one in inventory and on Avon Ave. Email me. Thanks.

    0Reply
  • Shefali R.
    Investor · Montclair, NJ · Member since 2015 · 150 posts · 23 votes
    9y

    @Ibrahim Hughes and @Erik Pedersen - saw your comments re weequahic from 3 years ago - was curious what your thoughts were re that neighborhood now in Jan 2017. I am exploring investments there. Thanks! 

    0Reply
  • Shefali R.
    Investor · Montclair, NJ · Member since 2015 · 150 posts · 23 votes
    9y

    @Lior Solomon did you end up investing in weequahic. How has your experience been - what is your sense of the growth trajectory there. Thanks! 

    0Reply
  • Vertical Jones
    Newark, NJ · Member since 2017 · 17 posts · 4 votes
    9y
    I work at that hospital lived in that area on Elizabeth Avenue for 8 years. Ask away.
    1Reply
  • Vertical Jones
    Newark, NJ · Member since 2017 · 17 posts · 4 votes
    9y
    Ibrahim Hughes very knowledgeable about the area I call home sir, I would love to pick your brain and just be a sponge I am a newbie and newark native trying to break into the game. Currently working on my credit, saving for down payment and reading everything I can get my hands on.
    0Reply
  • Nedje Severe
    Real Estate Professional · Elizabeth, NJ · Member since 2015 · 6 posts · 1 vote
    9y

    @Vertical Jones I was just in this area working on a property 2 blocks away fro the Hospital. Newark is up and coming its sad that the city still gets a bad rap from some home buyers. However for the people who see past the blemishes there is A LOT of potential. If your looking in the area we could share some information. 

    0Reply
  • Yeti Ross
    Brooklyn, NY · Member since 2017 · 1 post · 0 votes
    9y

    Hi Everyone,

    I'm currently looking at a deal in Newark, Nj in the Weequahic neighborhood. Bergen Street Renner Ave is the Area. I understand it's a hot market there in Weequahic right now, although I am not sure about this particular street. 

    I'm a first-time investor and I want to make sure the numbers add up.

    What is the estimated ARV for a 3 family house, 2 bedrooms 1 bath in each unit?

    What is the average rental price for a 2 bedroom apartment?

    Anything I need to know about this neighborhood?

    Any input would be appreciated.

    0Reply
  • Vaughn Smith
    Property Manager · NJ · Member since 2017 · 786 posts · 396 votes
    9y

    @Yeti Ross I don't know much about the neighborhood, I'm considering Newark myself (though Injear Weequic is hot) for ARV I would suggest 2 things apps like Redfin,Realto or Trulia and partnering with a realtor. For rents I would look at rentometer and zillows rental estimate app. Hope this helps

    1Reply
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