Rents Up - Values Up - Northern NJ Multi-Family is Hot

 The Northern NJ multi-family market is in a white-hot surge. Vacancies are way down and rents are way up. In fact, in certain parts of Northern NJ’s urban markets, rental rates increased over 11% from Q2 2011 to Q2 2012. In addition to the vacancy and rental rate trend, construction is also way up. In NJ, there are currently 4,400 market-rate units under construction with more then half of those being in Northern NJ.

Based on June 2012 statistics, vacancy rates are at a 4 year low of 3.5% and is expected to tighten up even more by years end. This will effectively increase rental rates which will have a result in multi-family properties trading at lower Capitalization Rates. Scott Allan of Weichert Realtors in is a prominent agent in the area and the owner of the popular blog The New Jersey Real Estate Guys. Allan states, “At this very time last year, multi-family buildings were trading at an easy 9% Cap Rate. Today, we are seeing multi-family assets trading for 7% in the C-Classification. I represented a buyer on a 9-unit building in Jersey City where we agreed on a 9% Cap price. Today, that building has appreciated and could easily trade at 7.5%. We contracted for that property only in February of this year. That is a huge indication of how this market is performing.”

An increase in the foreclosure process in NJ has been the result of the foreclosure process proceeding in NJ after the “robo-mortgage-signing” scandal put a hold on the process. Displaced homeowners are now forced to rent which has created a frenzy for rental stock demand. In the last 12 months, there was nearly an 80% increase in residents facing foreclosure (late beyond 90 days) from a year ago. Essex and Passaic County foreclosure proceedings doubled in that same time.

At this pace, effective rents will increase 4% for the year 2012 which will outpace last years jump of 2.3%. The increase in rental stock demand has real estate investors in a frenzy and not just your typical domestic investors. Foreign national money is pouring in to take advantage of a solid rental market in a very popular metropolitan area. Scott Allan states, “Foreign and domestic investors are aware that Cap Rates could drop to 5% and they are perfectly fine with that in some areas with lesser risk. Some investors are buying buildings in Hoboken at 4% Cap Rates, but Hoboken is also considered at the lowest risk levels of all urban markets outside of Manhattan.”

There are plenty of stable assets out there to target. For the rehab investor, there are opportunities to purchase older buildings, improve and stabilize, and refinance after 6 months to get most of your cash back out of the deal. Investors with that mindset and value add concept could see gains as high as 30% within a year.  offered investors a good window of opportunity for this in 2011-2012 and we are seeing good one's now in the neighboring Jersey City market.

If you are interested in NJ Multi Family Buildings for sale or would like more information on investing in income property, visit Scott Allan at www.NewJerseyRealEstateGuys.com or call directly at (877) 688-7582.