Getting started in New Jersey (slightly long) - Posted by Raphael-NY

Posted by Raphael-NY on August 15, 2005 at 14:41:36:

Thanks everybody for taking the time to help me out. Some of my situation may be familiar to some of you, but I want to see if I can generate any discussion here.

I live in Brooklyn and am looking to start investing in North-Central Jersey. (I am looking at Essex County.) My overall goal is to build an income stream from real estate. I’m trying to do this with a buy, rent, and hold strategy. I am therefore looking for small residential properties with strong positive cash flows. My eventual target is to buy 1-2 properties a year.

What first drew my attention to Essex County (and New Jersey in general) was a deal I was considering about one year ago. It was a three family with a 42K rent roll due to the high rents paid out by Section 8… After expenses and debt service, I projected cash flow of approx. $10,000 a year. It was offered at $270K, coming out to a cash-on-cash return of around 30%.

There are at least three areas in which I need help. Firstly, I?d like to know whether the above deal would have been good, average, or poor. Is it typical of the deals that I can find? (I believe it was being sold retail from a rehabber.) Would I be doing significantly worse if I wasn?t dealing with Section 8? In other words, can I regularly find properties with a 10%+ capitalization rate?

Secondly, I really need a better idea of where I want to invest. Which market should I target? I ended up looking at the Clinton Hills section of Newark merely because I saw it in a classified ad. Being an out-of-state investor, I?d like to concentrate my purchases so as to be able to visit them easier. I have very little knowledge of the trends in the area. Where is the growth going? Which areas have better renter demand and lower vacancy rates? Crime rates, school districts, etc. I need advice as to where to look and (hopefully) become expert in.

The third thing on the list is possibly the most practical. Does anybody know any good real estate agents for investors in the area they recommend? Even more vital - do you know an honest reliable property manager in the area that would handle properties my size. I don?t have the time to handle the day-to-day managing from Brooklyn and would therefore need to hand over most of the work to a manager. Finding a good manager is more important to me than a good agent because I can always work with a bad agent whereas a bad manager will kill my investment.

Any advice you have to offer would be helpful and be much appreciated.

Raphael Yavneh