How can I make it work in Northern New Jersey?

Question

Hi all! I recently began to look into buy and hold/ rental income as a ticket to FI. I’m literally in the process of reading books and binge listening to the BP podcast. I live in Northern NJ and am jealous of the property prices I’m learning exist in other areas of the country. The average 2 family home in my area is around 400K and usually needs work. That being said, my calculations are giving me about a 7% cash on cash when putting down 20% on a property and adding in closing and renovation costs. Also, I’m getting an average of $300 in cash flow per door (this is of course after my initial investment is returned). In order to make my long term goal of 100K per year in passive income through RE, I’ll need to have purchased 28 doors (This is all based on 20% down for all properties). Am I crazy in even considering investing in my area?

Matt Rusk · Answer

Don’t give up just because you live in Nj.  I am in the same area as you.    I am closing on my 3rd rental property next month. This is the 3rd one in a year and a half.   I buy little lake cottages. I fix them up nice. I basically create a A class property in a C neighborhood.   But then I get A class rents.  And A class tenants.  So I over improve the property for the area. But it works.

They may all be single family houses but I figured out how to make the numbers work.   Best of all if I put all the cash flow towards the mortgages I can pay off 30 year loans in 10-12.   My 3 houses would net me 50k a year if they were paid off.   So I would

Just need 6 properties to reach your goal of 100k in income.

You just have to not give up.  The first deal is always the hardest.  I would first figure out which towns have the lowest property taxes and start looking in those towns.  Property taxes are what make or break a rental in NJ.

Russell Brazil · Answer

Are you in a high rent growth area? My average door has zero cash flow on purchase. My average door in my portfolio now has $850 per door. Patience.

Jesus Checo · Answer

@Russell Brazil While I haven’t figured out the growth percentage in my area, I can tell you that my town of Bayonne, NJ (where I plan to invest) is 12 miles away from New York City, there are 3 light rail stations, we have a Walmart, we have a new Costco opening this Spring and there are numerous new high end condominium complexes being built around town.  You’re absolutely right.  Even if my cash flow would be minimal now, there’s huge potential for growth.

Sheronda Jarrett · Answer

There's going to be an event on Wednesday with Sunny Burns about this very topic if you can make it out:

https://www.biggerpockets.com/forums/521/topics/671311-nnj-rei-meetup-how-to-house-hack-in-north-jersey-w-guest-210

Allan Szlafrok · Answer

@Jesus Checo Taxes are far more reasonable in Jersey City for similar priced properties. For a property of about 400k I’d expect to pay 4-5k in property taxes. It’s tough to find deals but there is definitely a great opportunity to owner occupy in JC and I’d choose it over Bayonne for that purpose. I was just in the Greenville section close to the Bayonne border and I’m seeing properties in the low 300s. Greenville isn’t a great area but those few blocks once you cross the the Bayonne border are actually pretty solid and haven’t had the explosive price growth the other parts of the city have seen. I’d look there if I were you, or Bergen-Lafayette or the  West Side sections. Don’t give up it’s doable just not easy up here in Northern NJ.

Jesus Checo · Answer

@Shawn M. My original plan would be to rehab the properties to get A class tenants.  I just really wanted to stay in or close to my hometown however, yes, I’ll need to consider a location with less taxes.

Jesus Checo · Answer

@Matt Rusk thanks for your input.  The average taxes on a multi family property in my area are over 10k a year.  While I would like to invest in my area so I can be 10 minutes away from any property, I very well may need to consider looking at areas that pay less taxes.  You’re absolutely right.

Jesus Checo · Answer

@Shawn M. I’m definitely thinking of owner occupying however, at the rate I need to grow, that might only work for my first property.

Shawn Mcenteer · Answer

@Matt Rusk is right property taxes can be rough in NJ, he is also correct about improving units.  If you can find properties and update them in cost efficient way to cater to a high end tenant vacancy will be low and people will pay top dollar.

James Lim · Answer

I'm actuality looking for a place in North jersey, Morris County specifically. Anyone know any wholesalers or other investors in the area?

How can I make it work in Northern New Jersey?

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