Home Buying in 08735>Question Details

Mike Wagner, Home Buyer in Lavalette, WV

Why is it that when I look at the price of a home in NJ as an investment, the potential rent(s) from the?

Asked by Mike Wagner, Lavalette, WV Tue Jul 8, 2008

property in no way justify the price of the home. This was never the case 7-8 years ago. The return on any of the homes I look at is less than what I could make on an insured CD, not counting the work involved or my time...

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Kenneth Verbeyst’s answer
Mike, it has been quite a while since homes' rental prices justified their purchase prices. Most investors were counting on appreciation. Take your time as I expect rental prices to climb and purchase prices to continue to decline. Let your agent know you will only consider positive or break even cash flow properties.
2 votes Thank Flag Link Wed Jul 9, 2008
BEST ANSWER
The national average home price increase from 1987 to 1997 was zero after adjusting for inflation. From 1997 to 2007 the national average home price was up 151% after adjusting for inflation. Even if prices are down 20% in the past year, I think this tells you that they have a way to go or real estate, as an investment, is just dead money for the next 5-10 years.
1 vote Thank Flag Link Tue Jul 8, 2008
It depends on where you are looking in NJ. The shore market has always been strong and expensive. IF you want to invest here, your best bet is to look to multi family units. However, most investors know it takes a good 5 years for a property to become in the black, unless you are putting a large down payment.

There are urban areas in NJ where you can pick and choose from many properties that will allow the rents to cover the mortgage.

As far as your comment on your ROI, real estate has returned on average 6%/year. You would be hardpressed to find any CD paying that!
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1 vote Thank Flag Link Wed Jul 9, 2008
Property investment is a long term proposition and not a bad one at the Jersey Shore. Have you taken into account depreciation and other tax benefits?
1 vote Thank Flag Link Wed Jul 9, 2008
Houses are not generally good investments (unless you timed the bubble pretty good). It was certainly the worst investment for the 22 million people that bought at peak prices. About 9 million of them are already "underwater".
1 vote Thank Flag Link Tue Jul 8, 2008
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