All Forum Posts by: John Errico

Thanks @Jonathan Greene—@Cami Danielle I think New Haven is a fairly tough market (and, right now, overpriced). I’ve owned several 2, 3, and 4 families there, and sold most (though still own one). I sold because the market there is nuts right now: everything going for way more than it has been trading at over the last few years. I’m about to list my remaining property.

The thesis of m my investments there has been the idea that Yale and the other universities in New Haven have a vested interest in making sure New Haven is OK (or, ideally, nice), meaning that they will invest money in the community and expand their footprint to do so. Yale, in particular, has more money than some small countries, so they certainly have the financial means to invest in the city. That premise is generally true, but more particularly right around Yale and the other universities. Housing in those areas is very nice, and super pricey.

Farther away, housing is much less nice (and much cheaper) but your chances of renting to college students is very low. Mostly, you’ll be renting to local residents (some of whom may be employed by the university), but they’re not paying the rents that students are. The Yale “bubble” is still centered quite closely around Yale, and that’s also true of the other schools there. Outside of those bubbles, New Haven struggles a lot with poverty, crime and homelessness and the city is far from straightforward to work with.

I’ve struggled at essentially every property with rent collection except for properties where I had all Section 8 tenants. I made money via appreciation (and ultimately did well), but the rental income was, at best, treading water.

If you’re up for the management challenge, buy right, and have a longer term horizon, I think you can do OK but it may be worthwhile to wait for the market to cool down a bit. I also wouldn’t count on doing great cash flow-wise, even if it looks on paper that it’s a good deal... you’re going to struggle with collections and evictions, in my experience. Unless you live there and are up for it, you’re going to need to find a great property manager. 

Thanks @Jonathan Greene! @Yonia B. feel free to message me. I am an active investor in Atlantic City and also an attorney. Would be happy to help answer any questions. 

Hi @Sam Sala! Personally, all of my properties in NJ and CT are doing well. I have, perhaps, one tenant who stopped paying rent during this time, and another tenant who has been paying very late (but still paying), out of a few dozen total tenants. I think values, at least from what I'm seeing anecdotally around the area, have also been unaffected, at least as of now. I think low interest rates have helped that, and likely that the local (and national) rate of nonpayment of rent for residential tenants has been relatively low--a lot lower than I feared. 

One of the best reasons to invest in NJ (and particularly northern NJ) is the constant demand of people who want to be here for a variety of reasons. Even some of my vacation rental/Airbnb properties did fine during the quarantine because we ended up hosting first responders and traveling nurses--I know many whose Airbnb businesses completely collapsed. I think you'd have to almost go out of your way to find a buy and hold deal that would be an absolute disaster in this area (though, correspondingly, I think you'd have to go *way* out of your way to find a buy and hold deal that would be a complete, 100% home run). 

I wouldn't have any great hesitation in buying a multi-family in the area, provided all the other fundamentals about the property make sense. Good luck!

Hi @Emma Fitzgibbon there are a fair number of Atlantic City investors on BiggerPockets. I'm not sure what your budget or price range is, but I have a hard time thinking that new construction is going to pan out financially. There are quite a few properties in Atlantic City that are beach block (or nearly) that can be purchased, even in fair condition, for well below their replacement cost--as in, well below what it would cost to build them new. Even including the cost of a (large) renovation on some of them, you're probably still looking at something substantially cheaper than the cost of new construction. Houses that are truly *on* the beach or water may be something of a different story... but, unless you're intending primarily to occupy the house for your own use, I have a hard time believing that those would be great investments by most metrics, unless you're counting on longer term appreciation.

Flooding is definitely a problem in a lot of areas of Atlantic City, so flood insurance can be challenging, and, depending on the scope of your hypothetical renovation, you may need to raise/elevate the home (which would help with flood insurance, though raising homes is quite expensive). But, in any event, if you're looking to get started--there are lots of existing single family homes, or duplexes, near the beach or water that are extremely affordable (and you can, say, Airbnb the remaining unit, if you'd like, or find a long term renter). Best of luck!

Hi @Indro Dhar, welcome! I have a fair number of properties in Union City (2 and 3 families), and have generally done well, although working with the city and building department can be a challenge--I have quite a few stories. Union City is *not,* by any stretch of the imagination, a city that is friendly to investors/landlords--in fact, every year that I've been investing there (since 2014), the city has passed more and more tenant-friendly laws, and further restricted new development. Like many of the surrounding areas of NJ, prices in Union City are quite inflated--though they're still quite low relative to surrounding areas like Hoboken and Weehawken. 

My general perception is that "southern" Union City (e.g. south of, say, 15th St), and further west (closer to North Bergen) is less desirable, although the border between Jersey City and Union City is nice, and east towards Manhattan (on, say, Palisades Ave) is very desirable. The priciest places in Union City are north of 30th St, and closer to Weehawken (e.g. off of Park Ave). There are also some larger and more established developments there. 

I can't speak with experience to any of the markets you've suggested, but finding quality value-add deals in Union City, and anywhere in Hudson County, at this point, is going to be quite a challenge, unless you're sourcing deals yourself or have some other form of deal flow. Stuff on the MLS usually flies off the market if it's aggressively priced, and stuff that doesn't is usually pretty hairy (e.g. illegal apartments, city violations, leaking oil tanks, whatever else). You're probably looking at $400k+ at this point for a 2 family in Union City in almost any condition, unless it has some of the aforementioned issues, and, with renovation, that can make cash flow tight (certainly depending on size/condition/location).

Happy to lend my thoughts if relevant, feel free to shoot me a PM!

@Hui Song and @Amelia McGee most meetups are posted in the "Happenings" section on BP (https://www.biggerpockets.com/forums/521-events-and-happenings). I host a meetup in Essex County once a month, and it'll also be posted on BP when we're having our next one.

Hi @Elizabeth L.--my properties vary: I have some that have shared heat and hot water, and others that have separate (and one that has separate hot water, but shared heat). In my experience, it's usually quite a pain to separate heating systems between units if it wasn't built this was initially (as in, you'll probably end up having to run new entirely new plumbing for the system--which, for a hot water system, is conceivably, fo a steam system could be a lot of work). 

Although it's nice to have tenants pay for their own heat, there's also the added expense of additional boilers/units (which, even if they're servicing a smaller space, they really aren't *that* much cheaper than one, larger one, for the whole house), and servicing/replacing them periodically. I'd bet that, over time, it's cheaper to have separate systems for each unit... but, if you include the initial cost of setting it up (new equipment and new plumbing) plus servicing and periodically replacing the equipment, I'm not entirely sure how much you'd ultimately be saving. 

Hot water heaters are (generally) a lot cheaper, so the cost savings may be a little more obvious there. 

@Elizabeth L. it's a little odd to add a gas meter after renovations are done, and I'd be somewhat concerned that you're going to raise some red flags with the city or via whoever might do this work, particularly if it's PSEG. Is this a pre-existing third unit? 

You mentioned a "new" unit in the basement--usually, if you do this with permits (and particularly, from experience, in Union City), they're going to require you to put in another meter in the course of renovations. I just finished converting a 2 family into a legal 3 family (which was an arduous, multi-year ordeal) in Union City, and had to add 2 electrical meters (there were 2 originally, now there is one for each unit, plus a house meter), and ensure there were 4 gas meters (3 for each unit, plus 1 common for boiler and hot water, which are shared). 

Is the (gas) boiler for that one unit, or the whole building? If the basement unit is not legal and/or wasn't done with permits and approvals from the city, etc., I really wouldn't advise doing anything like putting in a gas meter (or, for what its worth, installing gas appliances of any kind down there). 

Hi @Steven Betz, I agree with @Joseph ODonovan that you are generally able to form an LLC yourself, but I would suggest forming the LLC in New Jersey (you'll likely legally be required to "register" in NJ, even if you form the LLC elsewhere, which is essentially double fees/taxes).

As an attorney, I am somewhat biased (hah), but I generally suggest people consult an attorney, if only for peace of mind and, to some extent, tax related issues, as Joseph alluded to. You'll likely use an attorney for the closing so, oftentimes, the same attorney you use for the closing can form your entity. I own a fair amount of property in Atlantic City as well (all via LLCs)--I'd be happy to help or give my thoughts, if relevant. Feel free to send me a message.

@Laurence Fru I agree with @Jonathan Greene re: Newark being a very block-by-block location. I generally have seen success with people investing in the north ward area (e.g. Bloomfield Ave and north), Ironbound/downtown, or the Weequahic area (the closer to Hillside the better)--I have either owned, manage/managed, or been involved with properties in all of these areas. There are doubtlessly other popular areas in Newark (that are discussed on BP with regularity), but I think those areas offer the best cash flow potential/forced appreciation. I'm not so optimistic on the short-term broader property appreciation in any of these areas (I think, for example, Ironbound is already quite expensive), but you can certainly find distressed assets in those areas, renovate/improve, and hopefully do well on refinancing, with still-healthy cashflows. 

If you're looking in/around Newark you may also be interested in East Orange (generally quite inexpensive, but suffering from some of the same safety issues that parts of Newark deal with), Orange, Hillside, and, if your price point is somewhat higher, Bloomfield.

I'd suggest simply driving around these areas, block-by-block, to get a sense of the neighborhoods. It's almost unbelievable how neighborhoods change in a ~5 mile radius around the area that you're looking. There are a bunch of local meetups as well where you can network with people who are investing in the area, many of which I would highly recommend. Good luck!