The Best Towns for Buying Investment Property in NJ

New Jersey—home to Sinatra, Springsteen, and Soprano (Tony, that is). It’s also home to a property market that’s ripe for investment. A slow-paced housing recovery, continuing high foreclosure rates, and growing demand have sown the seeds for a profitable 2018. In the year ahead, the Garden State holds a lot of promise—if you know where and what to look for.

Market Influences Highlight the Best Towns for Buying NJ Investment Property

As the state continues to climb slowly out of the recession, some areas will begin to hit pre-crisis highs while other towns could be forced back down by policy changes, such as the Jersey City property tax revaluations. But whatever the game changers, there is always opportunity for investors who play their cards right. Here is what I expect to see in happening the statewide property market in 2018:

Even more foreclosures.

It’s a sad fact that the New Jersey real estate market has become synonymous with foreclosures. In fact, according to recent research, New Jersey remains number one in foreclosure rates nationwide. One in every 562 housing units underwent a foreclosure filing as of April 2017. For investors, this all boils down to opportunity: there is still an inventory of distressed homes that could be acquired at a competitive price.

A growing shortage of affordable housing.

New Jersey continues to welcome wave after wave of new developments. Most, however, are luxury apartments and condos. As more families flee New York’s unaffordable housing market, they will be increasingly looking toward areas like Jersey City, Newark, and Hoboken. As well as sales figures growing, the number of people renting and, accordingly, rental prices are set to increase too.

Growing sales figures.

As of October 2017, according to New Jersey Realtors, single-family home sales were up 7.4% and sales prices increased by a full percent. With expected population growth, steady mortgage rates, and general economic optimism, I expect this trend to continue. That means distressed properties purchased at a good price and rehabbed can be sold at rising market value.

These market conditions create investment opportunities for both buy-and-sell and buy-and-hold strategies. With high foreclosure rates, investors should be able to find a suitable fixer-upper with relative ease. A quick renovation with an eye to selling should bring good returns as high demand and limited availability fuels the growth of sales prices. As a result, buy-and-sell investors achieve a compound effect on their investment.

But a shortage of affordable housing will also benefit those investors employing a buy-and-hold strategy. Achieving a suitable residential property cap rate should become easier as demand for rentals rises, with prices going up along with it. Buy-and-hold investors can feel confident in pursuing a long-term investment strategy.

NJ Towns to Consider for Real Estate Investment in 2018

Whatever your investment strategy, these are the towns that you should have your eyes on in the coming year:

Jersey City

Jersey City entered 2017 riding high from winning the Curbed Cup award and taking the title of “Neighborhood of the Year.” For the first time, the city’s median sales prices outpaced neighboring Hoboken’s and the market is still surging on a wave of optimism. Jersey City real estate trends show that home sales are up 103% year-on-year with a median list price increase of 5% in the same period, according to RealtyTrac. With easy access to New York City and business and retail investment coming in strong, it’s no wonder Jersey City is proving just as popular of a destination as Hoboken.

But for investors, things get better still. The number of foreclosed properties in the city has swelled in the past year. Between November 2016 and May 2017, the number of foreclosed homes at auction increased by 108.4%. What’s more, the number of bank-owned properties increased by 67.4%. And, thanks to new tax revaluations, the number may increase further.

Properties in downtown and older neighborhoods may face the worst of increases, which could leave many unable to afford to stay. These homeowners may be looking for a quick way out before increases hit, meaning you will need to act fast to grab properties at below-market rates. But, if you find the right property, there are good returns possible.

Newark

It should come as no surprise when I say that Newark’s population is set to boom. The city is on the up and up, thanks, in part, because the crime rate is down—in fact, it’s now the lowest in 50 years—and the city is being buoyed with new business investment by the likes of higher-end retailers that include Whole Foods and technology firms. As a result, individuals with significant levels of disposable income are flooding into the area.

The beauty of Newark’s growth is that it’s not tied to a single demographic. Everyone is looking to rent in the Brick City. To start with, Newark is fast becoming a hub for the young and talented. The Tech Talent Scorecard ranked Newark as the 13th best market for attracting top tech talent. Young, ambitious, and often single, these tech wizards command an average salary of $107,000. That’s a lot of disposable income to spend on the perfect Millennial pad. But families are making the move, too. With many young families priced out of New York and even Jersey City, Newark is increasingly viewed as somewhere to rent affordably while saving for a first home.  In fact, single-family homes, are particularly hot right now with ATTOM Data Solutions ranking Newark as one of the top 25 single-family residence rental growth markets in 2017. Things don’t seem to be slowing down in the coming year, which is good news for both buy-and-sell and buy-and-hold investors.

When it comes to finding a property, there is action to be had at both ends of Newark’s property market. After a long period without new construction, the city has suddenly become a hotspot for developers. Around 750 new homes have been built since 2015, with 1,400 more approved or under construction. What does this mean for house prices? Well traditionally, increased supply should flatten the market for a period. But as retail offerings grow around new developments, demand could spike in the near future. Investors will need to time their purchase perfectly, to strike while the market flattens and exit when it peaks.

But at the same time as new homes flood the markets, many across the city are still left vacant. Newark still has some of the highest levels of zombie properties in the country. This means renovation opportunities abound for investors who want to make a difference, revitalize the community, and turn a profit.

Hoboken

There’s a lot to love about Hoboken from an investor’s point of view. First and foremost, Hoboken’s population jumped significantly in recent years and there’s no sign of this population growth stopping. Why is it so popular? With Manhattan remaining out of reach for virtually everyone who doesn’t work on Wall St, young professionals and families are heading over to hip Hoboken. The PATH takes around a quarter of an hour to reach Manhattan from Hoboken Terminal, so this city is the perfect place for families that want to put down roots without losing touch with New York. Add to that the blossoming music and art scene and it’s not hard to see why Hoboken is attracting buyers and renters from across New York and New Jersey.

Before we get carried away, however, let’s make one thing clear: sales prices are high in Hoboken. In fact, on average, they are higher than anywhere else in New Jersey. But rental rates are high, too—a two-bedroom apartment commanded a median rent of $2,580 in 2016. That means investors should be able to achieve solid cap rates on rental properties, particularly if you seek out distressed or “ugly” houses.

With high prices, however, getting a great value home for sale in Hoboken can be like finding a needle in a haystack. But, if you have the right real estate investor lead generation strategy to find distressed properties, a rehab can create real value in this market. And because we don’t see the Hoboken market slowing down anytime soon, a successful exit should remain in the cards. Now’s the time to dive in before you’re priced out for good.

Finding Investment Properties in New Jersey

You may wonder why I’m sharing this information with you at the risk of getting crowded out of the market. The truth is, we—myself and the rest of the HomeVestors® team—love to help other investors. You see, independently owned and operated HomeVestors® franchisees in New Jersey work together to leverage the well-established “We Buy Ugly Houses®” brand across multiple local advertising channels. In fact, I’ve already had several New Jersey homeowners come to ask me to buy their house for cash. And, yes, one or two are even in the areas I’ve highlighted above. It looks like I’m all set for 2018. Are you?

Speak to HomeVestors today if you could use some help securing investment properties in New Jersey in the year ahead.

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