NJ Market Inflated Prices - Invest now or wait it out?

Question

Hi - I am a newbie investor looking for my first property.  Currently live in North Jersey and my husband and I would like to house hack for a year or so before fully renting it out.  Since June or so, the prices here have shot up - from what i can tell most I look at are around $100k + over the value they were the beginning of this year.

Right now I am thinking we wait this out, but wondering what those familiar with this market are thinking about the prices and how that impacts investment opportunities?  Do you think house hacking is possible in this market?  Do you think the current values are sustainable or will they go back down in a few months or so?

Obviously no one knows for sure, but would love to hear some thoughts around this.  I'm currently taking the approach of continuing to keep an eye on the market and analyzing investment opportunities, but thinking next year is going to be more likely for an investment timing wise.

Thanks!

Darren Sager · Answer

The market is inflated compared to what @Lisa Alexander?  I remember (yeah cause I've been at this a long time) in the 1990's when people were saying that real estate prices had hit their peak and would NEVER go higher.  Looking back now how many of you would have loved to get a buy and hold in the 90's like I first did and compare it to the prices we have today?  The big difference between now and then (besides market corrections and super run ups in prices) is the rate at which we can get loans for.  When I started mortgage rates were in the high 7's.  People would cringe at that today. Today's money is practically free with inflation.  So what would you rather do, sit on the side lines hoping for the prices to drop (and risk higher interest rates) or get in and get someone else to pay off your property that you hold for 20 plus years at crazy low rates.  You'll never see these rates again historically.  Take advantage of them.  Analyze the property.  If the opportunity is good long term do regardless of where the market is.  That's what we do.

Kevin Manafi · Answer

@Lisa Alexander North Jersey is always an expensive area to begin with, and then factoring in current market conditions, prices are a bit inflated. However, waiting for the market to drop or trying to "time the market" is never the best strategy because you never know when you've hit the peak or the bottom until it's too late! The best advice is to just do what you're doing and keep checking inventory on a regular basis, running the numbers on properties, and staying ready to pull the trigger whenever the right deal comes along.

Joe Edwards · Answer

@Lisa Alexander As a very active investor in both Bergen and Essex County I will tell you there are still great deals out there. I have closed on a 3 during this COVID time. It all depends on your invest strategy.

If you are looking for turnkey/ shinny/ new, then you have to expect to pay top dollar. In our market that purchase would be considered a retail purchase. You will be faced with all the buyers who are in the market with emotion.

If you are looking for a fixer that maybe a diamond in a rough that will give you great cash flow, appreciation and you can BRRRR. You will be need to set your emotional hat on fire and wed yourself to you investor hat. Keep looking at deals and keep working on the numbers and you will find some great opportunities.

Do yourself a favor and ignore people that tell you to wait until the bottom falls out. The people that say that for the most part arent active investors. The have been on the sidelines forever saying the same thing.

Get your numbers together. Formulate your investing approach and execute. Opportunity is always out there weather it's a sellers market, or 7% interest rates or cheap money and covid like now. Deals are there.

Also be mindful the great BRRRR deals dont just happen out of then air. For the most they are engineered. If you have any questions I dont mind helping where I can.

Best of luck out here. Stay after it!

John M Chludzinski · Answer

I will add that the most important factor is not "will prices change from today?" - they will - but "does this deal make sense for me today?"  Prices will always change, with a bias upward.  Look for something with good fundamentals, in a town with a decent school system - that way you are not under pressure to move out by a deadline.  If you need to stay a couple of years later, you can. Perhaps if you buy a multi with a smaller and a bigger unit mix, you can first occupy the small unit, then move to the bigger unit if you need more space, then ultimately move outward and upward when the time is right.

Mark Mettias · Answer

Todays "inflated" prices become the new comps, making the prices the new normal. I do not think and I wouldnt bet that prices would drop.

In that respect, the competition may die off a bit and the ridiculous prices over offer will probably die down a bit, along with the waiving of inspection etc. But I do believe that the prices / asking prices will not be going down

Vaughn Smith · Answer

@Lisa Alexander You should continue your search (perhaps broaden the area that you're searching in) and scrutinize/analyze the deals you find as best you can, interest rates continue to hover near all time lows which is great for buyers though the market is still hot and prices reflect that. Good deals come around in every market but in markets like theses they are harder to find. No one knows what the next couple of months will bring for rates or the market, but that shouldn't stop you. Keep analyzing and keep searching until you find what you're looking for

Adrien Salvador · Answer

Personally, I think if you are planning to "house-hack" these properties... You are mostly going to the long-term cash-flowing strategy. My mother purchase a multi-family smack dab in the middle of Jersey City (Greenville area) at a decent price. If you plan to hold it for many many years, I don't think that you even need to care how much you are purchasing it for. Likewise, I also purchase my house-hacked house in New Brunswick and I calculated that it will cash flow $1,100+ once I leave the place. I honestly don't care where the market goes from here because I will always cash flow nonethless. I do this with confidence because guess what... My mentor who owns 90 properties here in New Jersey just added 20 of his properties this year alone because he sees that this market isn't going to go anywhere. Rents have never gone down in New Jersey and I believe this is a more important factor than the short-term movement of your property's value. The fact that you can dramatically reduce your expenses house-hacking your own property is a plus itself :DAll I'm saying is that my me and my mother are currently house-hacking two amazing properties right now because we plan to hold these properties for at LEAST 10 years. I know for sure that in 10 years property values will never be this low. This is my two-cents, I hope it helps!

Peter Tverdov · Answer

I think 2021 will be a more realistic buyers market. Vaccine coming out, forcing people to go back to the office, NYers not panic buying into NJ, foreclosures will start up as well. JMO.

Lisa Alexander · Answer

@John M Chludzinski Great points!  I will keep this in mind as well.

Suril Dalal · Answer

I’m in Bergen County and I’m seeing inflated prices for multi family. According to all the posts on BP, I’m going to be waiting too. Waiting...but ready

NJ Market Inflated Prices - Invest now or wait it out?

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