PART 1: Whats My Real Estate Investment Worth?

    The Real Estate market in Hudson County has seen an explosion in development over the past few years primarily in the downtown Jersey City area. The skyline of Jersey City today looks nothing like it did ten years ago.

    screen-shot-2017-04-27-at-9-34-32-am(click here to see the development map)

    Here are four key identifiers that we are keeping our eyes on to help landlords understand when to sell their Investment Property.

    Competition

    Developers are taking advantage of the booming real estate market by investing heavily in downtown Jersey City and Journal Square.  There are 9,000 new units that are currently under development and a total of 37,000 approved units coming down the pike.  Enticing incentives are being offered to incoming tenants once a new building is completed. Developers are aggressively advertising luxury living with New York City views, offering great amenities such as gyms and pools and offering up to three months of free rent on the signing of a new lease.  These are all major incentive drawing tenants their way.

    Days on Market

    The increase to the average days on market for rental units was the first indicator that showed what the effect that new development was having to the surrounding area.  While downtown Jersey City rentals stayed relatively consistent averaging 37 days on market throughout 2016, surrounding areas such as Hoboken experienced an upswing  from 25 days in early 2016 to 34 days in early 2017.  Hard to rent units that sat on the market for 172 days in 2016 are now seeing 383 days before they are rented.

    Brokers Fees   

    The single investor that is using their condominium as an investment property are now beginning to offer concessions to keep up with the competition.  Landlords that experience high turnover of their rental units are beginning to offer paid broker fees either in part or whole to to avoid vacancies.  Decisions on keeping rental rates competitive and/or absorbing the broker’s fees are key incentives to attract a new tenant.  Both decisions will have an effect on your bottom line.

    Capitalization Rates

    “How is Jersey City’s development affecting my investment?“

    This is a question that we hear quite regularly. There is good news to this question and then there are future indictors that we are keeping our eyes on.

    The good news is that we continue to see steady growth in the value of property that is being sold in Hoboken and Jersey City.  In fact, condominiums that go on the market at competitive asking prices often receive multiple bids within days of it being listed.

    However, the increase in property values can affect the capitalization rate of your investment while rental rates try to stay competitive. 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.

    What does this mean to the real estate investor in Hudson County?   As rental developments continue to grow in Jersey City, it may become 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

    screen-shot-2017-04-05-at-8-51-07-pm

     

     

    Trackback from your site.


    One Response to “PART 1: Whats My Real Estate Investment Worth?”

    Leave a Reply