the best location for duplex/triplex/quadplex investing?

Question

Hi all,

I am going to start investing in rental properties from this fall/winter 2023.

I have a full-time job and will keep it so my strategy will be as passive as possible, such as buy-and-hold.

with 7.5% mortgage and much inflated prices I am in trouble finding the best location for rental property investing near my town.

I live in Bridgewater, NJ. I have been looking at properties in Somerville, Flemington, Somerset, Highland Park, Edison. in those areas there is no way to expect any cash flow after expense and mortgage due to the high price levels.

I couple of real estate agents recommended mostly north Jersey area, such as Linden, Elizabeth, Rahway, but those are also expensive and the neighborhood seems to be too tough for me to manage with minimal available time.

I had lived in Quakertown, PA I drove around that area before, and I found Easton area is also affordable and enjoying lower property tax. I also think Trenton/Hamilton area is also affordable, though its neighborhood is tougher than Easton.

So my question is: Is Easton is good place for small multifamily investing? if you have any experience, is it better than Trenton area? in general in those areas are good starting points for newbies? my very rough target is achieving 1% rule with minimal involvement.

Any advice will be very appreciated.

Thank you.

Shawn Mcenteer · Answer

one of the biggest mistakes I see being made in New Jersey are analyzing deals for what they are currently.  The majority of properties on market have rents that are below market value.  looking at deal for what it currently is producing tends to not work well with numbers.  Next is looking at property without putting work into it, purchasing turnkey in my opinion is sort of like stepping over a dollar to pick up a dime.  Finding properties that need work, updating them and attracting desirable tenants paying top dollar is what allows me to increase rents substantial each year.

Take a 2500 per month rental, 4% is $100 increase in rent.  Now lets say tenant moves out,  this allows you to raise rents to whatever you want.  Believe it or not I don't attract tenants that stay for long periods of time, most stay 1-3 years.  This past year one of my properties where both tenants left, I increased rents over $500 with zero vacancy on top of it.

Most properties I find for clients are in 500-800k range and require renovation.  I just got one rented for a client.  In under 6 month of owning he has over 100K worth of equity (did about 30k of work) and we just got one of the units rented for $1400 more than what the previous owner had it rented for.

If you toss MTR into the mix simply put its 20-40% increase in rent for spending 6-8k more furnishing a property.

I own many homes and have house hacked them all, what's stopping you from renting your existing home and your next property is a house hacking? I have clients doing right now. As I type I have bidding war for his primary that is now being turned into a cash cow rental.

Lloyd Preece · Answer

Lehigh Valley is a great market, plenty of Multifam options in Allentown, Bethlehem and Easton. North/West Bethlehem and the historic areas of Easton are going to be the nicest (but also most expensive with least cashflow). Southside Bethlehem has a lot of redevelopment happening and Allentown is mixed, with west of 13th st as quite a nice area, a lot of redevelopment around the PPL centre but a lot of run down areas too. LV is huge and has a ton of jobs across manufacturing, education, health care with a few colleges, hospitals and warehouses driving employment, not to mention the proximity to NYC and Philly and potential Amtrak links in the future. Whilst theres a lot of options the problem at the moment is low inventory and prices that have remained high despite the huge increase in the cost of money. A couple of years ago you could easily pick up cashflowing properties out the gates, its still possible now, but is much rarer and typically involves value add to get you there. However @Shawn Mcenteer is right about not needing to cashflow out the gates, you should be thinking about your investments as a long term game. This blogpost on Mortgage rates and if they really matter to long term investors, might help giving you some context https://www.biggerpockets.com/member-blogs/15238/101444-do-m...

Mackaylee Beach · Answer

Both MO and KS!  It's been an appreciating market for several years. The economy is doing well and the rental demand has remained strong. The cost of living is much lower than other cities which make it an attractive place to live.

Mackaylee Beach · Answer

Would love to connect if you ever consider investing in Kansas City.

Charles J Sabo · Answer

The Lehigh Valley real estate market is one of the hottest in the Country. I am not familiar with Trenton NJ, but other parts of NJ you can't compare the valley to. I grew up in Dover NJ myself. Easton is a great location and is a commuter location due to its proximity to NJ.

Joon Hui Yoon · Answer

Thanks everyone for your great advice. Now I am back to US with fund enough to kickstart my investing journey. Probably I will be staying in Central Jersey and will try for mid-term rental for a starter.

Yonia B. · Answer

Hi Joon,  Easton is a great location to buy rental properties specially within the college areas as those rent well.  Trenton area is not as nice as Easton but I believe you would find better deals.  Unfortunately North Jersey is really really tough to cash flow when the purchase prices in those multi's are so high and as a person that grew up in Central Jersey I can tell you that it is now equally as tough as North Jersey to find great deals.  New Jersey is still your best bet to invest in Multi Family properties and being that you are just starting out I would suggest you stay in NJ to be close to your investments.  My recommendation for you and where I take all my investors is South Jersey.  You can still find investment properties that are priced right and cash flow well.

Julien Jeannot · Answer

All great points. Cash flow day one is tough these days, especially in high appreciation areas.

I'd add, that I look for base hits rather then "best" in order to keep building the portfolio.

the best location for duplex/triplex/quadplex investing?

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