Best areas to invest $150k within 3 hrs driving distance from NJ?

[Bob Roach]

My search criteria:

• Cash flow is more important than appreciation
• Should be in an area where rental demand is high
• Should be in an area where it is relatively easy to sell. 
• Availability of management companies since I do not plan to manage the property myself
• Not interested in flipping 
• Property needs to be within approximately 3-4 hrs driving distance from central NJ.

So far I have considered the areas close to the university in Philadelphia. Jersey city (NJ), Union City (NJ). 

Before I decide to focus on an area I wanted to know which other areas would the experienced investors here recommend based on my criteria. Also, which state is most land lord friendly amongst these NJ,NY,PA,CT,MD,DE?

[John Errico]

I agree with @Kunal Mishra regarding Hudson County. Jersey City and Union City (and all of Hudson County) have gotten very competitive. Cash flow is still good, but, if prices continue to appreciate at the rate they've been going in the past ~2 years, won't be good deals for investors soon. You might look "deeper" into Jersey City, like Greenville, but for $150k it still may be hard to find a deal. You'll also have to worry about crime and below-average tenants. (Also, are you looking to invest $150k cash? Or invest it as a down payment and do financing? Or a max $150k budget for a financed property? With a $150k down payment, for example, you definitely buy many multi-families in JC or UC, but obviously depends if the numbers work for you).

Newark (New Jersey) and the surrounding area (i.e. Elizabeth) are an option, but you'll have to get lucky with tenants, and I'm not sure of the state of management companies there looking to manage a single 2-3 unit property. Obviously crime is a big issue, and the public school system is abysmal which attracts certain types of renters (namely, lower income people, or people without families/children). It may be a lot, particularly if you're going to be exclusively offsite.

You could get some distressed properties in southern Westchester county (Mount Vernon, Yonkers), in the $150k range, however, for higher rental demand, look towards the border with the Bronx. Cash flow will be OK, even with the high taxes (taxes will range for, say, 2 families from like $8-9k/year to $20k/year if they're assessed strangely), but your tenants will be lower quality (bad schools in a predominantly lower income area, particularly in the south), and crime is a big issue (although getting better), particularly the closer you get to the Bronx.

Finally, I've invested in New Haven County and had some success. Universities in New Haven keep the rental market active (vacancy rates are very low in general). You won't be able to buy in that price range anywhere around, say, Yale, but the university employs so many people that you can get property (2-3 families) in a relatively safe area that appeals to Yale employees, who are generally good tenants in my experience. I don't know the area super well, but be mindful of crime--it's very street-to-street and block-by-block. Rents are around where they are for, say, Hudson County, New Jersey, but prices and taxes are way lower, so cash flow is sometimes significantly better. I use a management company there as well that is quite good. Again, though, for your price range you'll probably be getting Section 8 or otherwise low income tenants, so the tradeoff for good cash flow is that your tenants will be of variable quality, which, obviously, is its own headache.

NY, NJ, CT are all incredibly tenant friendly. Not sure about PA, but hard to imagine almost any state that could be more tenant friendly than those 3. Don't know anything about real estate in MD or DE.