Foreign National Real Estate Investing in New Jersey

A Message To Foreign Nationals Buying Investment Property In NY Metro Areas

As many of you know, I have a strong international following of real estate investors.  I love working with them and I love even more when I get to travel to their countries to speak to their principals, partners, and groups.  One day, I hope to see every country in the world!  In speaking with new investors all the time, one thing I feel I should address is the misconception of multi-family property values here in Northern New Jersey.  I don’t think there is a multi-family market in the country that is stronger then the NY Metro areas of Northern NJ.  I follow other good markets like Tampa, Florida whose vacancy rates are about 5% now, but NJ is still stronger with continuous rental rate increases.  I say NJ is stronger for one reason and this is because the income of the demographic of renters in the area has enough room for even MORE rental rate increases without crossing the threshold of unaffordability if you consider the 33% income to rent ratio.

In addition to rental rates rising, the local NY Metro job and income levels are improving which is resulting in lower Capitalization Rates on multi-family properties.  A year ago when a 9% Cap Rate was easy to find in Jersey City, we are now having difficulty finding quality 7.5% Cap Rate investments, a healthy sign for the market believe it or not.

Investors looking to buy multi-family property must lose the double digit Cap Rate mentality in Northern NJ.  Otherwise it will be very difficult to find a quality real estate broker / agent to work with you because us good ones know where the market is trading at and putting in effort to find that type of inventory that we know does not exist is a waste of their time and the investors time.

Popular multi-family markets that we service, we have analyzed recent sales and have listed the average Capitalization Rate and what you can expect to see for a quality deal in these areas.

Jersey City – 7.5%

East Orange – 8.0%

Newark – 7.0%

Hoboken – 4.9%

Bloomfield – 6.8%

I’m not saying that stronger Cap Rates don’t exist at all, but I am saying that there is so much hyper-activity / demand for multi-family that most in this range are selling quickly.  If you are holding out for 10% Cap Rates like some of my investors, you will be sitting on that lonely fence for a long time.  Now is definately the time to buy and build your Cap Rate through annual rent increases and adding value to your asset.

Here is an interesting quote from Marcus & Millichap Commercial Advisors:

M & M’s Jersey office report laid this to continuing uncertainty in the residential for-sale market, stemming from overall economic uncertainty and the rising tide of home foreclosures in the state. After the hold on court foreclosure actions following the “robo-mortgage-signing” scandal was lifted this year, foreclosure rates have risen sharply.

Under these conditions, landlords will have the leverage to continue boosting rental rates, which have already hit new highs in 2012. By year’s end, average asking rents will reach $ 1,366 a month, says the report. Effective rents will jump 4 % for the year to $ 1,311 a month. Last year, effective rents were up 2.3%.

Meanwhile, fierce investor competition for the best properties in areas closest to Manhattan will keep investor’s capitalization rates compressed near 5%. Competition in the north is increasing driving “risk-tolerant” investors to older and distressed properties along train lines in Essex County, and smaller investors to central and South Jersey, M & M reported, saying the trend will continue.

If you are a looking for investment property information, please call Scott Allan at 877-688-7582 Direct or e-mail HERE.  Scott Allan is one of Northern NJ’s leading experts in Commercial Real Estate.

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