North New Jersey- Buy and Hold or Fix and Flip?

[Mark J.]

Curious if North New Jersey investors are seeing better opportunities in Buy and Holds or Fix and Flips. Looking around it seems there's not many opportunities for multis under 300K other than Newark, East Orange, surrounding area, and rare in those areas. It looks like there may be "value add" opportunities for SFH's under 300K, but mostly further out/west.

Wondering what type of opportunities people are finding, or looking for in North New Jersey. I know it's been said hundreds of times on the boards, but the high purchase prices and taxes make it difficult to get the numbers to work. I know investors are making it work, so curious to hear how people are finding success.

Is it just a higher entry price point to market?

Partnerships?

Major Rehabs?

Appreciation bets?

Thanks in advance for sharing your thoughts.

[John Errico]

Hi @Mark J.--I've been having a fair amount of success with both buy and holds and fix and flips in north Jersey. Pretty much all of the properties I've ever purchased around here would certainly qualify as "value add" plays--so stuff that was run down for whatever reason, where I forced appreciation by improving/renovating the property, oftentimes usually substantially (and then enjoyed appreciation, as well, when the broader property market increased in general). I still see buy-and-hold and fix-and-flip type deals around the area, though, on the MLS, those deals have been pretty rare for the past 1.5-2 years (although, in the past few months, I've seen a few more of them). If you're looking for something turn-key that will cash flow, that's going to be pretty rare, with the notable exception of some of the areas you suggested in your initial post: Newark, EO, etc. (which, in my opinion, are fine areas in invest in, if you have an understanding of the possibly management challenges and etc. you might encounter). I've definitely seen tons of multi-families on the market in those areas for well less than $300k--I'm sure there are many currently, some of which are at least arguably turn-key ready/ready to rent.

It undoubtedly is true that it takes more money to "play the game" in northern New Jersey than in other areas. The flip-side, however, is that rents are consistently healthy here; vacancies are generally low across the board; and, in some way, betting on northern New Jersey is a way of better on NYC (since, even if people may not actually commute to NYC, that's obviously the reason why the area is what it is). It's pretty easy to build a strong "thesis" around investing in northern NJ where the downside risk is fairly minimal, if you buy smartly. The upside may be somewhat more limited as well (though, at least, my returns have been healthy in the past few years) but I think it's a fairly solid play for almost any investment strategy you want to deploy. Within 15-20 miles of NYC in NJ you have essentially every type of property/housing/income/etc. level you could ever want.

I've primarily been focusing more on fix-and-flips than long term buy-and-holds in the last 12-18 months, which is somewhat a reflection of the real estate market, but there still certainly are deals for buy-and-hold investors.

Re: taxes--I see this come up a lot on BP with regards to north Jersey, and I'm always somewhat confused. I think taxes are obviously a big issue when living in the property, as your own primary residence. But, for an investment, usually taxes are baked into both the value of the property, and rents. If the numbers make sense considering your expenses (like taxes), then it's a good deal--if not, then it's not. Perhaps there is some (not unjustified) fear about taxes increasing and messing with returns... but that's probably true of almost any area. Taxes are high here, but rents are generally pretty high, as well, and property is priced where it is relative to that reality. 

Best of luck!