It is very common to visit a real estate seminar where you’re promised all the secrets of NJ investment properties and how to make a fortune investing in them. The next step is locating these target properties and flipping them for profits upwards of $50,000. Here is what you can really expect:

1. Taxes

   New Jersey is one of the most expensive places to live in the country. A major portion of those expenses involve property taxes. The average property tax bill in N.J. is $8,000 a year. You can get some lots larger than others but the average is $8,000. If you can find something cheaper, you buy it immediately, and if it’s higher, you investigate for the reason why. (Some places are worth it.) But compared to most homes in the Southeast region, $8,000 a year is unheard of.

2. Oil Tanks

   If I had a nickel for every time I heard the question “What in God’s name is an oil tank?” I would be rich. The layman’s terms explanation is that it was the technology at some point in history and was a good idea to bury massive metal drums with the intention to efficiently heat homes. In this day and age, those tanks are old and in some cases leaking. A clean tank with no contamination adds at least $1,500 in cost to the home. Now if the home has contamination in the soil, you are looking at up to $20,000 in costs. Experienced agents like myself can limit the cost, but I am not a miracle worker.

3. Local Ordinances

   Much like how marijuana is illegal nationally but legalized and controlled by some states, the states have their own housing/property mandates, but most are enforced by the municipalities. Some cities require more than others. More research is involved when looking at what’s required for certain renovations, as well as some of the basic ones.

4. Renovation Cost

   In some areas you may find major repair work costs significantly less. For example, just watch HGTV’s Flip or Flop; they do business in Southern California where removing a load bearing wall costs them $7,000. Well, the going rate in New Jersey is $40,000 for removing a load bearing wall. The reason for such an increase is largely dependent on the permits required. But do understand the difference in architecture. New Jersey is one of the original 13 colonies and most towns here are older than the country itself. Some homes were built before housing codes existed.

5. Smaller Neighborhood

   There are some areas in New Jersey where neighborhoods change from block to block. Most investment strategies require comparables within a certain distance. The problem with that is, some neighborhoods will not sell outside of a non-visible border that you cannot see without the help of a local. For instance, the sales in Newark, N.J., vary greatly from block to block. You can travel to one block where nothing sells, but one more block west can offer a hot market.

In closing, do not be convinced by someone in an expensive suit showing you the “secrets” to real estate success. The moment they tell you their system works all over the country, take that opportunity to leave. Many investors have “lost their shirts” to this market for the five aforementioned reasons. Tread with caution and respect the market. If you do that, you will not be one of them.

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