Journal Square vs. The Heights in Jersey City

[Kai Shen]

Hi all,

I am a newbie to BiggerPockets and new to real estate investing.  Right now, I am close to making my first investment and would love your suggestions on the pros/cons of JS vs. The Heights.  The 2 properties are about the same price:

Journal Square option - 3b/2b Single Family corner of Van Wagenen and Stuyvesant Ave.  About 15 min walk to the Journal Square PATH.  In good condition but oldish house.  Would this be easy to rent?  Is it too far from the Path?  I like Journal Square but not sure if this is a good neighborhood, the street looks a bit dodgy.

The Heights option - Small 3b/2b newly renovated condo.  Near Beacon and Baldwin.  Supposedly also 15 min walk to the Path, but this is north of the 139 hwy.  It's in my opinion on a much nicer street and close to Palisade Ave.  It is much smaller than the option above.

My strategy is to rent it out and get close to break even on 30 loan with 25% down.  Most important thing for me is to be able to rent it out at a reasonable rent to reasonable tenants.  

Trying to make this decision now, so would really appreciate all your help on this.

Thanks in advance

[Kevin K.]

See link below:

http://www.nj.com/hudson/index.ssf/2016/04/jersey_...

A reval doesn't mean taxes are going up.  Property tax is like a pie chart where each property contributes to the overall pie.  The overall pie (i.e. the total property tax collected) doesn't just go up.  All that happens in a reval is that your property is assessed to it's true market value, and the citywide tax rate is adjusted to reflect changes in assessed values.  In Jersey City, assessed values are around 30% of market value because the city hasn't adjusted valuations since 1988.  Because assessed values are so low, the tax rate is around 7% (i.e. $300K market value * 30% equalization ratio = $90K assessed value * 7% tax rate = $6,300 annual property taxes).  Another way to look at it...7% tax rate * 30% equalization ratio = 2.1% effective tax rate.

If your property value has gone up more since 1988 relative to the rest of the market, then you will take a bigger share of the pie (i.e. your taxes will go up).  However, if your markup in assessed value is about that the same as the overall markup of the city as a whole, then you're share of the pie stays the same and thus your property taxes are the same.  In Jersey City, it is expected that commercial properties (i.e. offices, large multi-family rentals, etc.) will see a bigger increase in property taxes, and waterfront condos that don't have abatements will see increases.  However, I suspect taxes on certain properties in Greenville, for example, will likely go down as the waterfront takes a bigger share of the pie.  It really is on a case by case basis though.  You have to look at your current assessed value, convert it to market value using the latest equalization ratio, and then determine if that market value is higher, lower or about the same as its true market value, and how much higher/lower it is relative to its true market value.  It's the relative difference that matters and how that relative difference compares to the market as a whole with the reval.  If your property's market value has grown faster than the equalization ratio has accounted for over time, then you may take a hit.  I've seen some properties around Journal Square and the Heights with ridiculously low assessed values so those properties should take a hit unless the reval shows that the waterfront takes a bigger share than expected.  It's complicated...

Some useful links with info on current tax rates and equalization ratios in NJ state:

http://www.state.nj.us/treasury/taxation/lpt/taxra...

http://www.state.nj.us/treasury/taxation/lpt/lptva...