Why I Invest in Newark, NJ Real Estate

Newark, NJ is undergoing a resurgence!  Residents and those who are paying attention can 'feel it in the air'.  Of course, there is also concrete and visible evidence of growth and vitality occurring in New Jersey's largest city:

  • Corporate headquarters for numerous companies such as Prudential Financial, Public Service Enterprise Group (PSE&G), The Manischewitz Company, and Panasonic Corporation of North America call Newark home;
  • Major universities such as Rutgers University and New Jersey Institute of Technology continue to attract thousands of students year after year;
  • The music and arts scene continues to flourish.  Museums, galleries, and studios offer so much culture.

Why I Invest in Newark, NJ Real Estate

I invest in Newark for various reasons.  The more practical reasons are that it is close to home, has an affordable cost of living, and is in close proximity to New York City.  However, besides the fact that Newark is close to my primary residence, there are more specific reasons why I invest in this city and not any of the other neighboring urban areas.

  1. As previously mentioned, Newark is the largest city in NJ and as a densely populated area it offers a great number of multi-unit properties to invest in.  I currently invest in 2-family properties for buy and hold investments.  Five-year estimates for 2007-2011 show approximately 20,233 two-unit properties alone in Newark and as new construction development continues that number will rise. [Source: The American Community Survey]
  2. Very much related to my first reason, the city is seeing an influx of new residents who need housing.  According to the 2010 US Census Bureau, 70.7% of Newark residents occupy rental units.  That is 195,962 individuals(!) and the population is expected to increase 13.8% by the year 2015.
  3. Real estate investors that are able to buy at a great price, renovate if necessary, and receive market rents can achieve a Cash on Cash Return (COCR) of 10% or more.  The COCR is calculated by dividing the annual cash flow of the property by the initial cash invested.  

COCR = Annual Cash Flow / Initial Cash Invested

The initial cash invested should include the sum of your down payment, closing costs, and any repairs done before the property is fully rented.  My first income property, fully rented, gives me a little over 10% COCR.  Not bad for a first investment.

Conclusion

Newark, NJ has strong rental demand that will increase as the population increases.  The city has so much to offer in the way of business, education, culture, and history.  It's location relative to New York City is a big plus and investors in the tri-state area who are unable to afford big ticket investment properties within the five boroughs of NYC can look to Newark to find more affordable investments.  I'm looking forward to what the future holds for this city and am glad I'm a part of it.

I would love to hear from both residents and investors.  What do you like most about Newark?