Reeling from new rent control laws, N.Y.C. investors set their sights on New Jersey

Reeling from new rent control laws, N.Y.C. investors set their sights on New Jersey

Presented as a public service by Joe Peters of Coldwell Banker

Reposted from re-NJ.com

A landmark package of new rent control laws passed by the New York State government in mid-June appears to have kick-started a new kind of boom for the New Jersey real estate market.

The laws, which dramatically strengthened tenant protections in New York City, took key steps such as repealing what was known as the vacancy bonus provision, which had allowed a property owner to raise rents as much as 20 percent each time a unit became vacant.

The new regulations have already started a major migration by New York real estate investors to properties in New Jersey, according to Brian Hosey, a vice president with Marcus & Millichap and the firm’s regional manager for New Jersey.

Brian Hosey

“One-third of our investors are now coming from New York City,” Hosey said. He noted that there has been additional interest by investors in communities in northern New Jersey, including Irvington, Paterson, the Oranges, Hackensack, Cliffside Park, Westfield and Summit.

“All of these communities are fair game for investors,” he said.

Most of the data on this movement is anecdotal at this point, yet seasoned investors in the Garden State are feeling it firsthand. So says Nate Kline, chief investment officer and principal with One Wall Partners. He said the Newark-based firm, which focuses on “multifamily, workforce housing,” has been investing in New Jersey properties since 2013, but noted that competition from New York-based investors has in fact ramped up recently.

“In my conversations with brokers, I’ve been told on frequent occasions that investors are entering the New Jersey market for the first time,” Kline said. He added that “the buyer universe of New York investors bidding on projects has clearly expanded because we know more people (from New York City) are bidding on assets in New Jersey.”

In another conversation, this one with a member of Freddie Mac’s production team, Kline learned that “this year, northern New Jersey became the most active loan origination market for the agency’s Small Balance Loan Program in the nation, overtaking Brooklyn.”

Michael Lefkowitz

Michael Lefkowitz, an attorney and real estate transaction specialist with Manhattan-based Rosenberg & Estis PC, noted that many of his developer and real estate investor clients are ready — and eager — to cross the Hudson River.

“My clients rent regulated multifamily dwellings and office buildings in New York, but for them that game is over” due to the new regulations, Lefkowitz said. “My clients are now focused on other asset classes, and you see more competition and interest in office buildings and also outside of the five boroughs.”

To Hosey, this new rush of New York real estate investors is all a matter of the economics of rent control. In particular, he considers the elimination of the vacancy bonus “shortsighted.”

“I understand that there is a major issue in that rents in cities are skyrocketing, but I think New York has gone too far,” he said. The new rules “have created a rent stabilization market (in New York City) in which rents are lower and a non-stabilized market in which rents are much higher.”

And both Hosey and Lefkowitz argued that, with the removal of the vacancy bonus, New York landlords will be reluctant to renovate vacant apartments if they cannot cover the costs through rent increases.

“Now that the rules have changed, these dollars are no longer being spent on property improvements in New York City,” Lefkowitz said. “The new regulations have taken away any incentive to better the housing stock.”

In another key development, the New York State regulations were made permanent. In the past, rent control rules were tweaked every four to eight years.

Nate Kline

“I think people were accustomed to relatively incremental minor changes every few years,” Kline said. “The regulations would go back and forth favoring first tenants and then landlords.”

With the new rules, this has become a thing of the past — barring changes in the future by new lawmakers or a new administration in New York State government.

Hence many New York-based investors are looking to the Garden State for what they anticipate will be better returns on their investments.

“What they’re not going to do is buy more rent-regulated properties in New York City,” Lefkowitz said. “They’re going to go elsewhere such as garden apartment properties in New Jersey. They tell me they’ll be able to get better returns from these properties.”

The New Jersey markets that stand to benefit from these investments are those that have transit-oriented housing.

“We as a company have always focused on markets with the transit infrastructure for getting into New York City,” Kline said. “We operate in the counties closest to New York — Bergen, Hudson, Essex and Union. These are the four counties that have the most transportation infrastructure, and they are the most densely populated.”

In addition, this new interest from New York City investors isn’t confined to the residential market. Many of Lefkowitz’s clients are looking to pour money into more traditional commercial properties in New Jersey.

“Real estate investors are chasing yield,” he said. “If they feel they can bring their expertise to a different asset class, they’ll look outside their comfort zone at other asset classes such as industrial developments and office buildings.”

The regulatory climate in New Jersey is far different from what has taken hold in New York State, Hosey said.

“To be sure, there is rent control in New Jersey,” he said. “But investors can put money in multiple-family buildings in New Jersey without too much worry about rent controls.

He noted that New Jersey rent control laws are administered locally rather than by the state, “and New Jersey cities have a more free-market approach.” In fact, some New Jersey communities, such as Montclair, have no rent control regulations

“Montclair has a lot of new projects going on, lots of high-quality rental units going up right now,” Hosey said.

The influx that is fast approaching New Jersey’s real estate investment market, stemming from New York’s new rent control regulations, could be long lasting. Hosey said it’s also a great opportunity for firms such as Marcus & Millichap.

“How much extra business will come from these investors is hard to tell,” he said. “We will need to educate these investors so that they understand a town’s rent control laws, learn what these properties are trading for, sales comps, rental comps and how to manage a property in a different market.”


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What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC]

What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC]

Presented as a public service by Joe Peters of Coldwell Banker

Some Highlights:

  • The “cost of waiting to buy” is defined as the additional funds necessary to buy a home if prices and interest rates were to increase over a period of time.
  • Freddie Mac forecasts interest rates will rise to 3.8% by Q4 2020.
  • CoreLogic predicts home prices will appreciate by 5.4% over the next 12 months.
  • If you’re ready and willing to buy your dream home, now is a great time to buy.

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Homeowners Are Happy! Renters? Not So Much.

Homeowners Are Happy! Renters? Not So Much

Presented as a public service by Joe Peters of Coldwell Banker

When people talk about homeownership and the American Dream, much of the conversation revolves around the financial benefits of owning a home. However, two recent studies show that the non-financial benefits might be even more valuable.

In a recent survey, Bank of America asked homeowners: “Does owning a home make you happier than renting?” 93% of the respondents answered yes, while only 7% said no. The survey also revealed:

  • More than 80% said they wouldn’t go back to renting
  • 88% agreed that buying a home is the “best decision they have ever made
  • 79% believed owning a home has changed them for the better

Those surveyed talked about the “emotional equity” that is built through homeownership. The study says more than half of current homeowners define a home as a place to make memories, compared to 42% who view a home as a financial investment. Besides building wealth, the survey also showed that homeownership enhances quality of life:

  • 67% of current homeowners believed their relationships with family and loved ones have changed for the better since they bought a home
  • 78% are satisfied with the quality of their social life
  • 82% of homeowners said they were satisfied with the amount of time they spend on their hobbies and passions since purchasing a home
  • 75% of homeowners pursued new hobbies after buying a home

Homeowners seem to be very happy.

Renters Tell a Different Story…

According to the latest Zillow Housing Aspirations Report45% of renters regret renting rather than buying — more than five times the share of homeowners (8%) who regret buying instead of renting. Here are the four major reasons people regret renting, according to the report:

  • 52% regret not being able to build equity
  • 52% regret not being able to customize or improve their rentals
  • 50% regret that the rent is so high
  • 49% regret that they lack private outdoor space

These two studies prove that renting is just not the same as owning.

Bottom Line

There are both financial and non-financial benefits to homeownership. As good as the “financial equity” is, it doesn’t compare to the “emotional equity” gained through owning your own home.


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Are You Ready for the ‘Black Friday’ of Real Estate?

Are You Ready for the ‘Black Friday’ of Real Estate?

Presented as a public service by Joe Peters of Coldwell Banker

Every year, ‘Black Friday’ is a highly anticipated event for eager shoppers. Some people prepare for weeks, crafting and refining a strategic shopping agenda, determining exactly when to arrive at each store, and capturing a wish list of discounted must-have items to purchase. But what about buying a home? Is there a ‘Black Friday’ for the home-buying process? Believe it or not, there is.

According to a new study from realtor.com, the week of September 22 is the best time of year to buy a home, making it ‘Black Friday’ for homebuyers.

After evaluating housing data in 53 metros from 2016 to 2018, realtor.com determined that the first week of fall is when buyers “tend to find less competition, more inventory, and the biggest reductions on list price.

The report explains,

“During the first week of fall, buyers tend to face 26% less competition from other buyers, and they are likely to see 6.1% more homes available on the market compared to other weeks of the year…nearly 6% of homes on the market will also see price reductions, averaging 2.4% less than their peak.”

What’s so different about the first week of fall?

George Ratiu, Senior Economist with realtor.com says,

“As summer winds down and kids return to school, many families hit pause on their home search and wait until the next season to start again…as seasonal inventory builds up and restores itself to more buyer-friendly levels, fall buyers will be in a better position to take advantage of today’s low mortgage rates and increased purchasing power.”

Learn more about how prices, listings, and buyer competition stack up during the first week of fall in your metro area.

Bottom Line

If you want to take advantage of the ‘Black Friday’ of home buying, let’s get together to discuss the benefits of making your next move this fall.


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Should You Fix Your House Up or Sell Now?

Should You Fix Your House Up or Sell Now?

Presented as a public service by Joe Peters of Coldwell Banker

With the fall season upon us, change is in the air. For many families, children are growing up and moving out of the house, maybe leaving for college or taking a jump into the working world. Parents are finding themselves as empty nesters for the first time. The question inevitably arises: is it finally time to downsize?

If you’re pondering that thought, you may also be wondering if you should fix-up your house before you sell it, or go straight to the market as-is, allowing a potential buyer to do the updates and remodeling. If you’re one of the many homeowners this camp, here are a few tips to help you decide which way to go.

1. Analyze Your Market

A real estate professional can help you to understand your market and the potential level of buyer interest and demand for your home. Are you in a seller’s market or a buyer’s market? This can change based on the price range of your home, too. A professional can also give you some insight on what you can change or remodel, and how to declutter your house to make it attractive to buyers in your area.

2. Get an Inspector

Right now, the average length of time a family stays in a home is between 9-10 years. That’s a little longer than the historical average, so if you’ve been living in your home for a while, it might be time to make some significant improvements. Think: electrical system, HVAC units, roof, siding, etc. An inspector can give you a better idea of the condition of your home, if it is up to current code standards, and recommendations on how to have your house ready before you put it on the market.

3. Decide If You Need to Remodel

You may also be thinking about driving buyer appeal with something like a kitchen or a bathroom remodel. If so, first dig into the market value of your home, and compare it to the actual cost of the remodel. A local real estate professional can help you determine your home’s market value, and you’ll want to get a few quotes from contractors on the potential remodel pricing as well. Once you have those two factors narrowed down, you can to decide if a remodel will give you a return on your investment when you sell. Oftentimes, it is actually more advantageous to price your house to sell, list it competitively, and then let the buyer pick the colors they want for their bathroom tiles and the type of countertop they prefer. The 2019 Cost vs. Value Report in Remodeling Magazine compares the average cost for remodeling projects with the value those projects typically retain at resale.

Bottom Line

Nationwide, inventory is low, meaning there is less than the 6-month housing supply needed for a normal market. This drives buyer demand, creating a perfect time to sell. If you’re considering selling your house, let’s get together to help you confidently determine what will be the best choice for you and your family.


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