Looking to invest in NJ but I can't understand how with taxes

[Andrew Dampf]

Hi BP, I'm a brand new investor, looking to pick up a multifamily via FHA and house hack. I'm reading through the book on rental property investing and I see on the "analyzing a deal" chapter, he takes into account the taxes. I'm looking in the Collingswood area and I'm not understanding how investing can make financial sense if taxes are estimated to be $7500/year on a property but places seem to be renting for $1000/mo. Is the solution to look at properties where taxes aren't so high? Thank you for reading and taking the time to reply.

[Jason Timmerman]

Andrew,

You're simply looking at the wrong areas.  It's a pretty easy fix.  Don't look at Collingswood for rentals.  Done. 

The way people there are making money is that they have 100% equity in those properties thus the rental cost covers taxes plus profit.  If you are going to hold a mortgage on one of those places, it is simply not possible.  Collingswood is a decent wholesale/flip market but not a buy and hold market. 

If you're new to this you need to do some market research and find what areas are best for which type of investing.  If you're looking for buy and holds you're going to have to look outside of Camden and Gloucester County.  Cost of living is too low comparative to property taxes.  For example, in Freehold (Monmouth County), a one bedroom apartment will rent for $1700/month.  Taxes will still be about $7500/year.  You can purchase a condo or apartment for about $180k, at a 3.8% property tax rate and generate $200/$300 a month on a buy and hold.  In Collingswood that's simply not possible.