City of Orange, NJ - Is It Good for Multifamily Investing?

[Mark Dresdner]

Hello Fellow BPers!

I am wondering if the City of Orange, NJ is a good town for multifamily investing. On one hand, there are signs of the town improving and cap rates are decent. However, on the other hand, the crime rate is high and there are many empty buildings. 

Do you have a view on the town's multifamily investment potential -- considering the current situation and potential changes in the future?

Thanks!
Mark

[Diogo Marques]

If you were your tenant, would you live there?

There is your answer.

[Brian Ploszay]

Orange has some lower income residents.   That is okay, if you're experienced.

[Kevin Schaefer]

If you can find a deal in Orange I would go for it. It's definitely better than E. Orange. Although that being said there's some great E. Orange sections too. 

[Johnathan Boyle]

Mark Dresdner it depends on what part of Orange. Closer to South Orange the better.

[Jonathan Greene]

@Mark Dresdner - Orange and East Orange are both ripe for investment opportunities, but both can present challenges on a block by block basis due to the number of foreclosures or abandoned homes on each block and how it affects overall block value. For both areas, you want to be close to the train to maximize your rental income. A lot of areas are really owner/landlord preference based on your comfort level. I show REO and other disaster properties in both towns all the time and really believe there is scaling value in both on a longer-term scale.

One other thing to note, renovations take some relationship development with the town in these areas as the building inspectors can be difficult depending on what day you catch them.

[Janel F.]

I'd say it depends on the numbers and your comfort level in owning the property.
I bought a property in one of THE WORST neighborhoods in Brooklyn. The property cash flowed immediately, continues to cash flow well and has doubled in value in 4 years. It's still one of the worst neighborhoods in Brooklyn. I wouldn't want to live there but my tenants do - and they're not social program tenants. When I bought, my house was the only renovated house on the block. Since then, some of the original neighbors have gone and at least 6 other houses have been rehabbed and sold.

I'm currently looking in east orange because I see some of the same things happening there that I saw happening in Brooklyn while I was still hesitant to buy. 1 - a lot of development, 2 - a new tenant/buyer pool. I'm a native brooklynite and Brooklyn was always frowned upon until after 9/11 when people got scared to live in Manhattan. As the Manhattanites started moving into the Brooklyn neighborhoods closer to Manhattan, the Brooklynites started getting pushed further and further into Brooklyn . . . And fast forward many years later people are starting to get priced out of Brooklyn and Manhattan. Where are they going? I know of many people that have now made Jersey their home - I actually have a tenant looking to buy in Jersey because he doesn't want to be a renter but he can't afford to buy in brooklyn yet brooklyn is where his roots are and where his family is. Are people moving in droves to orange and east orange? No, but it's likely only a matter of time before they get priced out of the areas closest to the city - those areas are already pretty pricey.

So I'm cool with finding a good block in a not so great area but developing area, providing a quality product, finding solid tenants and watching my cash flow increase over time.

Just my .02

[Thomas Lee]

@Jonathan Greene, could you elaborate on your insight that "renovations take some relationship development with the town in these areas as the building inspectors can be difficult depending on what day you catch them"?

As a newbie investor, I'm not sure what the context is here. Would the circumstances in which a renovator be interacting with an inspector basically be when trying to get a new CO permit issued by the township? Are there any other contexts? And what are the challenges in passing an inspection here?

[Vaughn Smith]

@Mark Dresdner all real estate is local (a you probably know) there are good sections and rough sections in every city. I would start by identifying what types of tenants you're willing to deal with many areas in NJ with the best cap rates don't have the best tenants. Bloomfield seems to be a happy medium though in the southern section you can find a good cap rate  with solid working class tenants maybe even NYC, Newark Commuters if you rehab the property well enough