Hello, everyone. While they are not my cup of tea, so to speak, does anyone invest in town homes in the NJ region, particularly in the Winslow Township, Camden County, area? Also, if anyone can provide experiences with investing in town homes, I would greatly appreciate it.
I have 2 townhomes and a SFH in Evesham Twp (just down the road but in Burlington County). I like townhomes because, in my experience:
- They are built relatively simply so rehab is easier
- They are generally cheaper to buy than SFH but rent for about the same.
- Non end units especially have less exterior maintenance
- There is generally little to no yard maintenance for you or your tenant
- They seem to have a good rental demand
The main problems I have:
I find it very difficult to find and buy at prices that allow a profit in this area (SJ). If there is one piece of advice I can offer it is DO NOT PAY TOO MUCH FOR YOUR PROPERTY. Read the forums and you’ll see the general rule of thumb is MAX PURCHASE PRICE = (FMV x 70%) - (cost of repairs). In this market many investors are looking at multipliers of 55% to 65% rather than 70%. I try to follow that rule as well as meet my goals of a 10% Cash On Cash rental return after ALL expenses. Again, read the forums and you will soon realize there are many more expenses than simply your mortgage, taxes, and insurance.
Property taxes are HIGH. I’m paying around $4800/year on each property. It can kill your cash flow.
Home Owner Association fees “can” be high. One of my townhouses has $150+ monthly HOA fee. Again it kills cash flow. The other has no HOA fees. They both rent for the same amount. Guess where I want to buy my next townhouse.
Best of luck.
Hey, thanks, jmd_forest. I appreciate your wisdom. Given the pros and cons you’ve listed, I see clearly the risks associated with this type of investment. So, where will your next purchase be? Do you buy SFHs in Willingboro, NJ?
I stay away from Willingboro since I target areas a step or 2 above the prevailing Willingboro socioeconomic conditions. For my next purchase I’m looking in the same community where I currently own the townhouse that has no HOA fees.
In my limited experience (I’ve only got a few properties under my belt), the main risk of REI is paying too much for the properties when you buy. One of the REI “oldie but goodie” is that you make your money when you buy (by buying low). I’ve bid on about 20 properties in my target area over the past 2 years and only purchased one and only regret not increasing my bid on one of the properties on which I was outbid. I’ve kept an eye on several of those properties that were purchased by other investors and when I run the numbers based on public record purchase prices and my estimate of repairs I don’t know how they made any money. I do know at least 2 were sold at a loss and several sat on the market for over a year before selling at 25% or more discount to their initial price after rehab.
Again, in my experience, and in this area, finding a true bargain property is the hardest part of REI.
Hey, thanks, jmd_forest. Your feedback is truly golden. I’m actually closing on a short-sale approved colonial home in Willingboro, NJ next month. The ARV is currently $171,000, based on the same type of home that sold a few streets over about 3 months ago. Other recently renovated homes of this type sold for $185,000 and up within a mile to 1.5 miles from subject property. However, I’ve only factored in the comp that’s within the same park of the subject property. I’m purchasing it for $67,000, and cosmetic repair costs(labor and material) amount to $28,000.
My goal is to target Burlington Township homes within the $200,000-$350,000 price range(short sales) within the next two months since the profit margin is visibly more attractive.
I wish you the best of luck with your project. My advice would be to make sure your property is BETTER than the competition and priced just slightly lower than the competition. Buyers have so many houses to chose from and prices are soft so I’d make sure that it was OBVIOUS your property is the one they should buy. Make it great inside and out.
From the figures you have provided it seems like your deal should be a big win for you.
Again, best of luck.
Hey, thanks, jmd_forest. I’ll keep you posted.