Best areas for rental properties in NJ

[Abdul R.]

Looking for opinion/advise of an experienced investor who know NJ and the tri-state very well. What area in NJ are best for holding rental properties. I picked NJ is because I live there. I am thinking/hoping to buy a property or two every year for positive cash flow. Any general tips is also welcome. I am new and never been a landlord. I have read BP, a couple of good books and now ready to invest.

Thanks,
Abdul

[Robert S.]

Oh boy, what a topic to discuss. Where to begin... New Jersey happens to fall in to the #1 or #2 spot for the richest state in the nation over the past several years, using per capital household income as the metric. This means you are dealing with a very educated homebuyer. NYC is the largest populated city by far in America, nearly doubling the second most populated city. Its workforce consists of the cream of the crop in its businesses. NJ/CT/Long Island are the suburban byproducts of this great city. NYC is the financial hub for America, therefore how long do you think it would take for all of the Ivy League financial geniuses and their underlings working in NYC to realize not only could they make megamoney while at work, but they could also make money(via a compounding equity build) while house hacking a multi-family in the suburbs while they merely live there? Post-housing crisis answer, not very long. So, now that the real estate investing population has flooded the NJ mls realtors with "show me houses that cash flow positive" requests, the end result is, a flood of buyers more than willing to househack a property that the rent may barely cover the owner's property taxes and utilities. This creates a supply shortage, and followed by an increase in asset price. In previous decades, '60's, '70's, '80's, '90's, NJ duplex owners would live rent free, in nice neighborhoods while their renters covered their housing expenses. Clearly not the case anymore. Unfortunately, unless you don't mind living in an extremely undesirable area, the opportunity just isn't there on the mls. Distressed multi-family properties in nice areas get sold very quickly, and the ones in really nice areas certainly are nowhere near entry level prices. The general consensus in finding multi-family properties at an entry level price point, is go to a state that ranks in the 20's for per capita household income, i.e. - North Carolina. You can find significantly cheaper housing, lower property taxes, with a lower educated population (not my opinion, these are government statistics). IMHO, competing with NJ's owner occupied buying population that is willing to overpay just to get a multi-family property will lead any investor down a disappointing road. The NJ owner-occupied multi-family homebuyer is looking at multi-families in nice areas as a means to build up more equity over time, whereas straight up investors are looking for investment grade positive cash flow, these are two very different concepts. Hope this helps shed some light on the topic at hand.