One of the biggest obstacles to successful real estate investing in New Jersey are the State’s egregious property taxes. Along with inflated sewer taxes, HOA fees and permitting costs, real estate taxes often make the difference between a good investment and one that will never deliver the financial returns most investors require.
Don’t get me wrong, I love investing in NJ real estate. It’s simply that you need to pay very close attention to the property’s tax and sewer burdens before making your purchase. For example, Scotch Plains is a well-known high tax township in Union County. I once looked at a mixed use property in Downtown Scotch Plains which had one apartment above two small storefronts. I estimated the maximum monthly rents from this property to be about $4,000. However, the property taxes on this building were nearly $16,000 alone meaning you’d have to collect four full months of rent just to cover the tax burden… This is ridiculous! As a result, I made an offer on the property well below the asking price so I could generate the ROI needed on the investment. The property ended up selling to another investor who obviously has a much lower rate of return requirement or who plans on occupying one of the spaces – there is just no other good reason that property should sell for the price it commanded, especially since it had sat on the market for almost 6 months prior to my offer.
The bottom line is that New Jersey real estate investors need to pay close attention to a property’s tax and sewer burden as these two fixed costs can have a dramatic impact on your return on investment. I generally guide investors towards lower-tax townships or properties which have an adequate rent roll to cover this on-going expense.
Contact me today to discuss smart investing strategies so New Jersey’s crazy high property taxes don’t turn a good investment into a bad one!