We all know that every market is different, and we all know there are opportunities in EVERY market (some are just harder to find then others 
). My dilemma is this;
I currently live in northwest Jersey, where the cost of living is pretty high. Being about 60 miles outside NYC, we are in prime commuter territory, as those who can’t afford to live IN Manhattan, come here.
My problem lies in this high cost of living, and the difficulty in finding properties that will cash flow without putting HUGE amounts down and ruining liquidity. As an example, some “broad†research across the US shows that houses can be had in SEVERAL regions of the Midwest for 50-100k (I know Hakrjaks market is an example of this, as he seems to routinely purchase in this price-range). In New Jersey, you can barely own a shed for that price. :bgh: Now granted, the rent is lower in these regions; however the difference or “spread†of rent prices is nowhere NEAR equivalent to the difference in housing costs. I recently bought a nice little townhouse in my town for 173k (putting 17,300 down), and was very lucky to do so (the property was originally listed for 213k, so needless to say I got a DEAL). I am also lucky because; putting 4 college aged kids on my lease, the property casfhlows a little while a “normal†rental lease in the development would have left me a couple hundred short every month. To give you some numbers:
My Mortgage payment on a 155,000 loan ($4600 in taxes) = $1510.
My rent with 4-people each paying $410 ($410x4) = $1640.
NORMAL rent in the development had I put the house on the rental market for say, a young couple = $1300-1350.
As you can see, had it not been for a few things falling in my favor, there is no way the rent on the place would cover my mortgage. (Regardless of the fact that I will eventually make that lost money back when I sell it in a few years, for the time being, it would be negative cash flow in my portfolio).
What keeps me up at night is that; In other areas of the US, I might have been able to buy TWO houses for that price, and have both of them casfhlow.
That being said; is location truly hindering my progress as a real-estate investor? Would I be better off expanding my horizons and be willing to purchase out of state for the right deal (even if that means hiring a property manager to manage them)? It seems like it would be SO much easier to leverage properties (buying below market value of course) in other areas of the country, and it makes me wonder if I am a fool for not taking the jump (granted, the appreciation may be slower in other markets, but there is still plenty of gain to be realized). Because I would like to get into commercial real-estate in the next two years, this decision is something I have been taking very seriously. Just living here in general and making mortgage payments on my primary residence may be holding me back as well, but that’s another story.
Just wondering if any other investors have contemplated this in their market, and what the “Pro’s†opinions would be on my situation.
). My dilemma is this;I currently live in northwest Jersey, where the cost of living is pretty high. Being about 60 miles outside NYC, we are in prime commuter territory, as those who can’t afford to live IN Manhattan, come here.
My problem lies in this high cost of living, and the difficulty in finding properties that will cash flow without putting HUGE amounts down and ruining liquidity. As an example, some “broad†research across the US shows that houses can be had in SEVERAL regions of the Midwest for 50-100k (I know Hakrjaks market is an example of this, as he seems to routinely purchase in this price-range). In New Jersey, you can barely own a shed for that price. :bgh: Now granted, the rent is lower in these regions; however the difference or “spread†of rent prices is nowhere NEAR equivalent to the difference in housing costs. I recently bought a nice little townhouse in my town for 173k (putting 17,300 down), and was very lucky to do so (the property was originally listed for 213k, so needless to say I got a DEAL). I am also lucky because; putting 4 college aged kids on my lease, the property casfhlows a little while a “normal†rental lease in the development would have left me a couple hundred short every month. To give you some numbers:
My Mortgage payment on a 155,000 loan ($4600 in taxes) = $1510.
My rent with 4-people each paying $410 ($410x4) = $1640.
NORMAL rent in the development had I put the house on the rental market for say, a young couple = $1300-1350.
As you can see, had it not been for a few things falling in my favor, there is no way the rent on the place would cover my mortgage. (Regardless of the fact that I will eventually make that lost money back when I sell it in a few years, for the time being, it would be negative cash flow in my portfolio).
What keeps me up at night is that; In other areas of the US, I might have been able to buy TWO houses for that price, and have both of them casfhlow.
That being said; is location truly hindering my progress as a real-estate investor? Would I be better off expanding my horizons and be willing to purchase out of state for the right deal (even if that means hiring a property manager to manage them)? It seems like it would be SO much easier to leverage properties (buying below market value of course) in other areas of the country, and it makes me wonder if I am a fool for not taking the jump (granted, the appreciation may be slower in other markets, but there is still plenty of gain to be realized). Because I would like to get into commercial real-estate in the next two years, this decision is something I have been taking very seriously. Just living here in general and making mortgage payments on my primary residence may be holding me back as well, but that’s another story.
Just wondering if any other investors have contemplated this in their market, and what the “Pro’s†opinions would be on my situation.
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