This is not to say there is not a great deal SOMEWHERE out there, but it will be extremely difficult to find suck deals in the Northeastern NJ area. Other people's statements of getting 10% ROI are true, but as I stated earlier, good luck finding that. If you do, make sure the rents currently charged are market rate. Some are artificially high due to long term tenants w/ yearly increases. If they leave, you're back to square one on rental value.
In Hackensack in particular, there are some good values out there, but vacancy rates will be relatively high since there are a lot of empty rental units listed in Hackensack. To rent them out quick, I see listings on the MLS (I am a registered Realtor) dropping the asking price. Others with high rents are sitting empty for months.
There are properties in Hackensack that you can consider if you're still interested. I can help do the math and show you CONSERVATIVE earnings (or loss) estimates for each place.
Example of a loss property:
Selling for $500k, which at 20% down = $400k mortgage.
$400k mortgage @ 6% for a 30 year loan = $2400/mt (rates are slowly climbing right now so 6% may be hard to get).
Taxes = ~$12000 (for larger / newer places) that equates to $1000/mt
Insurance for a typical 2 family location is $1200/yr for a tenant occupied location. ($100/mt)
That equals $3,500/mt in expenses.
typical rents for a 3BR = $1500/mt (depending on condition, but we're talking about a $500k property).
Even if both units were 3BR's that's only $3,000/mt That's a net LOSS of $500/mt without including other expenses/repairs.
Some will try to convince you that you get to take "losses" from depreciation and the tax benefits would offset that, but that is far from the truth. Your actual CASH flow will remain NEGATIVE.
As a rough rule I've been using to calculate values, for every $100k you borrow, make sure you're getting at least $1,000 in rent, just to break even. That means for the property above, you need $4,000/mt income (since you're borrowing $400k). I also wouldn't count on "appreciation" of the property anytime soon. As much as the pundits would like to say the recovery is just around the corner, we have to consider prices jumped 300% in the last 5 years in this area. We still have a lot more to go in my opinion.
I would also be wary of foreclosed properties as it generally takes about 6 months to a year for a property to go through that process and during that time, I can assure you they are not spending extra money to keep the place in good shape since they are having a hard time just to keep up with mortgage payments. Expect at least a few thousand in repairs/paint/replacing major appliances to get these places rentable again.
I hope this helps you figure out your plans and good luck!
As many have mentioned, foreclosure properties are a cost effective way to begin your real estate investment portfolio. However, while more affordable to purchase, they typically require more work including minor to complete rehabilitation. A lender can explain the details of special financing available (i.e. FHA 203K Rehab Loan) which will allow you to obtain the mortgage for the purchase price as well as additional funds for renovations all lumped into one monthly mortgage payment. Now for investors, I do believe they require a larger down payment than for an end-user (someone living in the property). It's a great way though to get involved with investing in foreclosures. My office has hundreds of foreclosure properties throughout New Jersey (our main foreclosure office is in Cranford), so if you're interested in learning more about the process feel free to contact me, I'd be happy to help!
ERA Statewide Realty
Office: (908) 874-7797m ext 519
Cell: (908) 444-3106
There are many, many foreclosures out there that allowyou to buy multi families at a deep discount but most of them are inner city. Newark, Passaic and Paterson are close to where you live. I am working with investors who are looking in Paterson and I tell you its not for the faint hearted.You need to do your homework and understand how things like Section 8 operate. Also how the towns are. For Example Jersey city has rent control on buildings with 4 or more units. 3 units and above require you obtain a state inspection called a green card. In Paterson you should not buy buildings with 2 bedroom units - too many available, you need to look for buildings with units of 3 or more bedrooms. There are an enormous number of illegal buildings where there are more than the authorised number of units and towns are cracking down - Clifton is a good example. I could go on for hours but if you need more drop me an email.
Welcome to the world of real estate investing. It is a great place to be. Hackensack is a great town to own investment property in due to HUMC. Tenants are readily available. There is another area that will be in the same position very soon that I would love to tell you about. You can buy before the prices go up. Please contact me through my website and I can give you all the details.
I look forward to hearing from you.