haha, well, I'll refrain from commenting on the "ghetto" part, but the state is doing a lot to try and clean up the inner-cities, so there are pockets that are really lucrative investments now. For example, Newark-near the university, law school, courthouses and the business district are starting to really come along. It has some great restaurants and shops, quick Path ride to Manhattan, easy access to major highways, the stadium and some nearby bars, etc. In this day and age, a huge part of the draw in the residential real estate world is convenience factor, so whereas people (especially younger people) used to live in the burbs and commute in to restaurants and work and events and school, they now just want to just live close by, which has resulted in a ton of gentrification happening throughout NJ neighborhoods that used to be not so enticing.
Also somewhat unique to NJ (and pretty weird to a lot of non-Jersey people) is that there can be million dollar homes and a town or even a few streets away the houses average $250,000 and have terrible schools. The benefit to that is that slowly the good neighborhoods have been able to expand into the not so good neighborhoods, which is tougher to do with a cluster of 5 or 6 towns that just aren’t desirable. So, for example, you have the areas like Asbury Park’s east-side. No one wanted to touch Asbury a few years ago, but it is surrounded by a lot of really high end beach towns, so slowly it became, I live on the edge of Asbury, but I "basically" live in Deal or Loch Arbor, or Allenhurst, or Bradley, etc. and slowly the stigma disappeared and now there are condos on sale for a million.
If you look at cities like Jersey City, where I live, you have a perfect example. I would go ahead and say with some confidence that you would never have wanted to live there, or even really be anywhere near there 10 years ago...even maybe 5 years. Now, a small one bedroom Downtown goes for $750,000 with parking spots selling for an additional maybe $30,000 to $65,000 a piece. New high end retail, restaurants and bars are popping up weekly. Rents go up to crazy numbers, like $4,500 for a 550sf apartment not even on the waterfront. People who bought when things were not so great, or "up and coming" are sitting on a major pile of cash now. In my opinion, it's all really about whether you intend to hold a property and if you have the time to wait on it before you see your real return.
You can rent them out in the interim, but like you said, the areas that are a little bit rougher or farther from public transportation probably won't rent for as much just yet. But all of those cities have proximity to NYC or easy access to Path or otherNJT options, and that is tremendously valuable today. There are still parts of JC I wouldn't walk alone in or even want to drive through at night (just a few blocks from the very expensive areas I mentioned above, by the way), but in time, each neighborhood is cleaning up. Other considerations are that in inner cities like that, there are people who have families that have lived there for generations, and while there are bad pockets, those people really do take pride in ownership and want to see the cities thrive. Also, those areas had a high number of foreclosures when the market crashed andmultiple houses on a single block might be vacant. If other developers are picking up a bunch of those properties and making the street pretty decent, you attract a different kind of buyer for yours, too.
A lot of NJ has lower inventory for rehabbers because the high property prices, and high taxes,make the margins too tight. The alternative is, again,to buy in the areas that aren't as "upgraded"and hope for the best, which the pattern throughout the state seems to indicate the best may be realistic.
So I apologize for the stream of consciousness and very long post, but bottom line is that, in my experience (some people may have differing views or experiences as to the quicker sale part) you’re not so much investing for a quick return in those types of areas. It's more of an investment in the city as much as in the property, but with patience, it can be a huge success!
