NJ Income Property | Investment Multi-Family
Welcome to New Jersey!! An area where real estate investors have been making money since the stone age. NJ has been a long standing state for income property for a few reasons; Location, Location, Location. New Jersey not only offers a variety of residential real estate, but depending on the area you are looking into, NJ has some of the most diverse areas in the country when it comes to industry, proximity, and transportation.
As most of you know, our focus is northern New Jersey. We can cover Clinton Township’s laid back suburban territory of Hunterdon County, and we are also very experienced in the hussle and bustle areas of the NY Metro areas of NJ including but not limited to Hoboken, Jersey City, West New York, and suburban towns like Montclair, Bloomfield, Fort Lee and many more.
The first thing to identify is your budget. How much do you want to spend on real estate. Better yet, let’s start with what can you afford to put down for a down payment. After the down payment, be sure to have about 6-8 months of reserve payments. The bank will normally ask for this during your loan process (if you borrow). Current down payments in New Jersey for multi-family investment property run about 80% Loan to Value, or 20% down. That said, look what you can afford as a down payment and work backwards. If you have $100,000 in cash that you feel comfortable investing, chances are you are looking for property in the pricerange of $450,000 to $500,000. Most importantly, the bank will also be looking at the income produced on the property.
If you’d like, please use our searching tool for all available property in New Jersey in our right column. It may take you a while to look through listings, maps, pictures, etc. When you narrow it down to 10 properties or so, let New Jersey Real Estate Guys work their magic and do the due diligence to get the rent rolls, tax and insurance information, and other known details that the seller must disclose.
Once we gather all of the pertinent information, lets look at how the bank identifies the maximum LOAN amount on the property. Value is based on 3 methodologies:
- Cost approach: This is based on how much would it cost to acquire the land and build the proposed property from scratch. In today’s market, this approach is very rarely used
- Income approach: An analysis of comparable rental properties is done to determine market rate for the rents. Once that number is determined, a cap rate is chosen based on the market (cap rate is what an investor is requiring in terms of an unlevered rate of return) and applied to the NOI. To calculate the value, divide the NOI by the cap rate (Example: $350k ÷ 8.5% = $4,117M value).
- Comparable approach: Value is based on recent sales of comparable properties. This is just like a residential appraisal.
Clearly, there are a lot of variables in determining your real estate investment. New Jersey Real Estate Guys can assist in all of the details in helping you find your real estate investment and give you the best opportunity to make a living and grow wealth through real estate investing.
Our areas of expertise include single family homes for sale, condos and townhomes for sale, 2 family homes for sale, 4 family homes for sale and all other multi family buildings whether it be residential or commercial dwelling.
If you are interested in searching multi-family homes in northern New Jersey, feel free to browse our MLS searching system in the right column over there ——————–>>>
As always, if you would like to set an appointment for a showing on any real estate in New Jersey, be sure to contact Scott, our real estate investment expert for a free consultation!
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