As a former real estate investor and rehab developer, a good share of my real estate practice focusses on current investors in Newark, NJ. Most of my clients buy and hold properties for rental, but a few buck the trend by flipping rehabbed properties. So, as we entered 2014 I sought to confirm what at least a segment of the current investment market looks like by adding some hard data.
The segment I chose to look at (which is also a prime target for several of my clients) was 2-family houses having 5 or 6 bedrooms (best for rental income), which sold for in 2012 for $100,000 or less. There were 55 such sales as reported by the Garden State MLS. Of the 55 purchases, 39 (71%) were still in the hands of the same buyers as of 12/31/2013 (although the names of the owning entities may have changed), while 16 (29%) had been flipped. The average sale time for the flipped houses, as measured by days on market, was 305…a long time to wait for a sale which explains the preponderance of buy-hold investors. Here are the details of the flips:
- Average buy price $65,443
- Average flip price $212,431 (per public records)
- Average gross margin $146,987
Assuming an average rehab cost of $80,000, the net profit would be around $67,000.
Feel free to contact me at 973-865-1863 if you have any questions about investing in Newark or anywhere else in NJ.