Thoughts about investing in NJ multi-family properties?

Question

Been researching multi-family properties in Newark NJ and Harrison NJ based on their proximity to mass transit (path train).  Anyone have any experience in these areas. Any recommendations whats a good cap rate? NJ is in a state of flux if you ask me with the oustanding foreclosures and Hurricane Sandy so would be interested to hear from current property owners.

Freda Johnson · Answer

A great resource is REIS. Multifamily market data can be viewed as well as other commercial real estate data can be found there. Another great resource is Loopnet. I caution you however to never trust the cap rate in the property listing! However, if you sign up with Loopnet and pay the annual fee, you will find it as a great resource for market data i.e days on market, price sold, property financials, employment statistics, zip code / city statistics, demographics, etc. At then end of the day, as an investor, you have to analyze the deal, run the numbers and look at the other factors that have a direct and indirect impact on the property and neighborhood. As I mentioned I specialize in the commercial properties and also hold my Masters in International Real Estate. I can send you a few quick ratios that can help you analyze the deal and better understand cap rates.

Freda Johnson · Answer

@Kendra Gimblet absolutely! Just make sure u send a vote my way ;)

Freda Johnson · Answer

Hi Peter,

Thanks for your great question.   I have over 6 years of experience in multifamily investments both commercial and residential and also own and manage a few of my own in the Essex/Passaic County areas.  You are correct when you stated that NJ is in a flux with outstanding foreclosures, especially in the areas of Newark, Trenton, South Jersey and Paterson.  As a resident and property manager/owner in Newark, NJ, I highly recommend that you invest in multifamily properties where there is a high demand in rents such as Newark particularly the Upper Clinton Hills section/ Vailsburg/Weequahic/Mount Pleasant areas.

The cap rate is calculated by taking the Net Operating Income / Property Value or Purchase Price. Therefore, the cap rate is directly related to # of units.  Typically the cap rate runs around 7%-9% for commercial multifamily properties in B/C areas in Newark 6-15 unit buildings.  To me, 11-12% is ideal in these areas and I am willing to show you ways to increase your cap rate and overall cash on cash return.

Ankit Duggal · Answer

Simple Metrics for Northward are as follows:

$60-70,000 a unit renovated
$30-45,000 a unit distressed

I have invested over a million dollars into assets over the last few years into Newark. Newark is urban so blocks really matter even in Northward so the best advice that I can give is study the market and complete a feasibility study that matches your investment thesis.

Ankit

Freda Johnson · Answer

Personally I think David Lindahl RE MENTOR has the best education! I have been to many seminars and by far, I think you will get the most out of RE MENTOR @DavidLindahl. I know you will walk out of his bootcamp confident and ready to make some deals happen. And tell him I sent you ;)

Ron Winkler · Answer

Freda

you sound like a Real pro,

i'm a newcomer to this site. not do i have "big pockets"

would you offer some ideas/lectures how to get started in the market?

your input is greatly

appreciated

Kendra Gimblet · Answer

@Freda Johnson  I learned so much from reading this thread from you thank you so much! Any information your willing to pass on I am grateful to read.

Johann Jells · Answer

Freda, how does one find out cap rates in various locales? Is it published or proprietary? I often see them quoted, like here, have seen them in appraisals, but wonder how to access them to value properties. Are they only available in listings for commercial property? My experience with smaller properties is the reported expenses are often fiction. Had I not been experienced my most recent purchase looked like a dog with $12K in heating expense, it's been under $3k after a new NG boiler.

Steve Wilcox · Answer

The market is crazy, prices are running up. I am finding it VERY challenging to source good deals even in some of the tougher areas, and am loosing lots of bids even when I am going slightly above that my maximum offer is.

I have also lost bids when I am the highest and best offer, all cash quick close with no inspection. So i am having a hard time buying.

Any wholesalers out in these areas?

Thoughts about investing in NJ multi-family properties?

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