Modeling assumptions for NJ Market?

Question

My first investment property, so appreciate the feedback. Looking at 2B condos. Everything I'm modeling out is in the red so far...looking at Hackensack, Cliffside Park, Teaneck, and North Bergen. Thoughts on the assumptions I'm making?

Vacancies: 6.6%

Credit Loss: 1%

Expense growth rate: 3%

Cap ex: $100/mo

Insurance: $150/mo

Leasing/ad fees: $50/mo

Vacancies: 6.6%

Credit Loss: 1%

Expense growth rate: 3%

Cap ex: $100/mo

Insurance: $150/mo

Leasing/ad fees: $50/mo

Lindi Nguyen · Answer

@Jonathan Greene well said, thanks for the insight!

Robert Conlin · Answer

@Lindi Nguyen

It’s continues through central Jersey as well. You pretty much have to go south of Raritan bay bridge to try to get a decent deal or go more inland (up 80 west) or central west (rt 78 area).

Remember you also had a great flood of people trying to escape NY with all the draconian lockdowns and even people like me in North NJ looking to get out.

Northern Nj and even Rockland county are a shell of what they used to be.

It’s either older people hanging on to what they have until they can’t anymore or it’s younger people escaping another area into there. It’s become very mixed with a lot of transients.

Taxes are excruciatingly high. Now u have these same groups attacking through inflation and controlling supply chains. I mean think about it all of a sudden prices go up 40% and supply chains are being held back. This is like a siege of this was medieval times.

My advice overall is get out of northern NJ if you can’t get out of NJ all together. I’m telling you from spending most of my life there. Not an easy thing to say for me.

Lindi Nguyen · Answer

@Robert Conlin It is definitely seeming to ring true as I continue to run anything that pops up. Thanks for the background on what’s going on in the market up here! Very insightful.

Robert Conlin · Answer

@Lindi Nguyen

It’s modeling out red because prices are exorbitantly high and only leaves room for institutional investors to make sense which means renting and once institutional investors are in they have incentive to keep it high or they lose on their investment. It’s a sick cycle but it’s where we are now.

I had a house and a 1b condo in the Hackensack surrounding towns and glad to be out.

Hackensack has the largest employer in the state (Hackensack meridian health) however institutional investors already rebuilt down town area and you can only rent which leads to what I said above. Funny thing is they rebuilt downtown right before covid so coincidentally perfect timing…

North Bergen may be a play but lots of headaches there.

My advice is get out of Bergen County and northern NJ for that matter; they ruined it. Such a shame.

Jake Handler · Answer

Thanks for the kind words Shawn.  Lindi- happy to help you analyze condo opportunities.  It's what I do for fun lol.  The above comments gave great feedback as well.  I house hack a condo by the room and the numbers definitely work now and will continue to work when I move out.

Shawn Mcenteer · Answer

Hi @Lindi Nguyen you may want to speak with @Jake Handler he really knows the condo market,  he finds really creative ways to make condos work!  I just spoke with him last night at  monthly REI meet up, super bright guy.

Lindi Nguyen · Answer

@Colleen F. This makes a lot of sense, thank you!

Colleen F. · Answer

@Lindi Nguyen  Capex really is an issue of what you own. If your unit has it's own heating, hot water heater, and AC units then it would be higher then if  the condo association owns all the mechanicals. Leasing/ad fee $50/MO and you are renting it yourself, what is the fee for?  do you need to put it on the MLS in NJ. There are other ways to list.

Alexander Szikla · Answer

Vacancy is commonly 5% but always good to be conservative.

You seem to be missing utilities and maintenance (separate from CapEx - i.e. your boiler will go bad in 20 years, but you need to mow the lawn every month)

Insurance seems high on a per unit basis