Guttenberg, West NY, Union City, etc..?

Question

Two partners and I are ready to invest in a 5-6 family in North Jersey, and we're thinking there will be steady appreciation around the Guttenberg, West New York, Union City New Jersey area.

Does anyone have experience in these areas? Would anyone convince to me to go elsewhere?

Doug O. · Answer

Not really - rent control in UC is more lenient than other nearby towns, say Hoboken or Jersey City. It's more the tenant profile you encounter there. I've owned in UC for the past 7 years and while I target the lower rent demographic (easier to fill vacancies and not as demanding with amenities), I've found the challenges of dealing with tenants to be more demanding that in those other towns. First piece of advice, make sure you speak Spanish (seriously, not making a joke). I'd say 2/3 of my tenants speak no English. Second, many of the tenants fry foods which tends to cause a lot of work in making units rent ready during turnover, and in many cases ruins nearby cabinets. This has been a huge pain for me. I've installed tile backsplashes in an effort to curb the damage and make it easier to clean, but in some cases it's a huge amount of work to clean up. Third, be prepared to have to go to the property and collect rents each month since many pay cash. This tends to be the case with about 50% of my tenants. I think it's a cultural thing where a lot of them prefer to hand me the rent directly and receive a receipt. Plus, many of them do not even have bank accounts. Again, this applies more to the lower income tenants. May sound silly, but a lot of these things really differ from town to town. UC is also tough to capture high end rents, depending on where you are. One of the main reason I seek lower rent properties is for the shorter vacancy periods. I know that with an $800 1 bedroom, I can get new tenants within 30 days. A block down I see a 1 bedroom asking $1100 or more, and it sits for months. Keeping in mind that for $100 difference in rent, one month of vacancy takes a year to recover (which a lot of stubborn landlords never seem to recognize)...

Doug O. · Answer

I'm not sure about the steady appreciation in any of those areas, however, they are all very solid rental markets. There is no shortage of decent tenants, but each town has its own nuances. Guttenberg is generally the most difficult to deal with, although Union City has its own unique set of challenges. I have dealt with all 3 directly & indirectly for several years, so you'd need to be a little more specific on what you're wondering for me to assist more.

Timothy W. · Answer

@Doug O. is one of the challenges the rent control laws in union city?

Chris Daliani · Answer

I may have the opportunity to purchase a 3 family in Guttenberg. They are all 2 bedroom 1 bath and renovated nice. I personally know the seller. For those in this area what do you think comfortable rents would be for each unit? $1,400?

Tim Booz · Answer

Achi Adamit Pretty much nailed it. Speaking Spanish would be very helpful, and you'll definitely have requests to pay the rent in cash. (This can sometimes mean offers of partial payment as well, with promises to bring the rest of the rent on the next payday.)

In the properties I take care of in the area I've found you can have better luck setting expectations of rent from the start of a lease, as opposed to when you inherit a tenant.

For example, we require that tenants pay the rent via direct debit or online. To find those tenants we're usually running ads online, as opposed to placing a for rent sign with a phone number. When a tenant is willing to correspond via email it can help with language barriers (google translate isn't perfect, but it can certainly bridge a gap). I've also found that email savvy applicants are usually able to work out online payment or direct debit, as long as they can do it on a smart phone.

Like Doug mentioned, if you can find a building that makes a profit with rents under $1000 you'll have no trouble with finding tenants, anything sub $1000 should fly.

Diana Tian · Answer

i am currently looking in this area as well, jersey city, union city, west New York, Gutenberg. It is easy to rent but had to find good cash flow deals because of high prices and property taxes. The rent is still relatively low  compared to other NY metro area.

Marco Y. · Answer

I've never invested there but its definitely something I want to look more into. In my opinion values of those properties are only going to increase as vacancies continue to decrease and the metro NYC area keeps rising in demand.

I like the tenant pool in the area (working class, many immigrants) which tend not to cause many headaches for landlords.

The only negatives I can think of is the high entry cost to enter that market and the operating expenses. Taxes tend to be higher than other counties in jersey (excluding Bergen county of course)  and parking is definitely an issue.

Best of luck to you in your investing endeavors.

Michael Meier · Answer

It has been 8 years, Achi; how did it end up working out? Did you jump into investing in Hudson?

Achi Adamit · Answer

Looking for constructive criticism on our below analysis on a 5 unit property in West New York area...

Keep in mind they are conservative numbers. What are your thoughts?

"NOI will be a bit above $20,000. At say a $425,000 price, (asking is $475,000) cap rate is about 5 percent. Gross rent roll is $56,244. So at $425,000, GRM is 7.55 and price per unit is $85,000.I think we could get a mortgage of about roughly $260,000. So at $425,000 we would need $165,000 for the purchase plus about $20,000 for closing costs plus about $10,000 as a repair reserve. So we would need $195,000. Anything over $425,000 would require more cash. After mortgage payments we would have about $5,0000 in cash. So cash on cash return would be about 2.5 percent ($5,000/$195,000).  However after adding back amortization and depreciation the return would probably be equivalent to 4 percent for a non real estate investment."

TIA

Marco Y. · Answer

I've never invested there but its definitely something I want to look more into. In my opinion values of those properties are only going to increase as vacancies continue to decrease and the metro NYC area keeps rising in demand.

I like the tenant pool in the area (working class, many immigrants) which tend not to cause many headaches for landlords.

The only negatives I can think of is the high entry cost to enter that market and the operating expenses. Taxes tend to be higher than other counties in jersey (excluding Bergen county of course) and parking is definitely an issue.

Best of luck to you in your investing endeavors.

Guttenberg, West NY, Union City, etc..?

Most Popular Reply