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    PART 3: What’s My Real Estate Investment Worth?

    Real Estate development seems to have hit an all-time high in the surrounding areas of Hoboken and Jersey City. By taking a drive up the New Jersey coast on any given weekend, one can start to appreciate the potential investment behind the multiple developments that are going up with lightning speed.

    While some investors continue to see real estate in Hoboken as a hot market for their investments, others seem to be selling off their assets.  Here are some key indicators that tell us what’s happing.

    Landlord Sales

    Condominium sales between 2009 thru the end of 2016 have been steadily growing with a noted increase coming from the landlord demographic. Many can attribute the housing market crash in late 2008 as a reason landlords held off on selling their assets. Condo owners simply didn’t want to take the loss when selling their home in a down market, so they held on to their investment as a rental until it became profitable.

    By analyzing condo sales with a rental history, we have seen the landlord demographic increasingly grow to a strong 15% of the market by 2015.

    Capitalization Rate

    In Part 1: What’s My Real Estate Investment Worth?, we looked at the massive competition the individual landlord is facing with Jersey City Development and how it has an effect on capitalization rates.

    The capitalization rate (net income/purchase price) is used to estimate the investor’s potential return on his or her investment.  While we see continued growth in property value, a reduction in net income by keeping the rental rates competitive or absorbing brokers fees are bringing capitalization rates down.

    Many landlord/investors see this reduction in cap rates as an indication to sell.

    Days on Market vs. Competition

    Days on Market for rental units have been steadily increasing in Hoboken.  This may be directly attributed to new developments that are going up in Jersey City where a tenant is offered one or more months of free rent and no brokers fee.

    This may change in the future, however the priority of any current developer is to quickly get tenants in their new buildings and are offering major incentives to quickly fill the building to capacity.

    With 9,000 new units currently under development and 37,000 already approved for development, the impact is being felt to the individual landlord in the surrounding area.

    Within the last year 208 Hoboken landlords offered to absorb the brokers fee either in part or in full to get their rental property occupied, nearly doubling the previous year of 117. 

    Should I Sell or Keep Renting?

    What does this mean to the real estate investor in Hudson County?   As rental developments continue to grow in Jersey City, we see from the data that its becoming more challenging to bring in a tenant when your investment is not occupied.

    You still have a strong investment that is valuable if you decide to sell it in the near term.

    Keep in touch with your agent and have regular conversations about their active renter and buyer database. Weigh your options on how your long-term investment strategy will work in a growing yet competitive market. Finally, work with your agent and develop a solid exit plan when you feel its time is right.

    If you have any questions or want to discuss strategies, do not hesitate to reach out to me.

    Rich Cronin – rich@primereg.com (201) 566-6049

     

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