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Paterson NJ is a prime spot for passive investment, find out why on the Passive Cash Flow Podcast .
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Aaron Fragnito: All right, ladies and gentlemen. Welcome back to the Passive Cashflow Podcast, episode number 12. Today, we're going to talk about why invest in Paterson, New Jersey. Mr. Martinez, my business partner and I, have been very ambitious on Paterson, New Jersey. We've invested there now for years. We're really putting a lot more capital in that city. We see a lot more momentum and the numbers speak for themselves. We're going to go over that today. For about 15 minutes, we're going to talk about the market there, some cool developments that are coming in, some really interesting changes in the Paterson market, specifically here in Paterson, New Jersey. We're located in Berkeley Heights, New Jersey, of course. If you want to learn more about how to get invested passively in New Jersey apartment buildings, go to peoplescapitalgroup.com where you can input your information. Maybe come to one of our seminars, our webinars. Of course, just set up a time. You can learn more about our upcoming opportunities here at Peoples Capital Group, but let's jump into it here with Paterson, New Jersey. Simple numbers here on zillow.com, which is wealth of information. These days, the internet, you could really just find out so much about a property from the comfort of your home. About 6.8% is the estimated groawth for the upcoming year here on zillow.com, so that's a good sign. In the last year, there's an 11.3% increase in home values in Paterson, New Jersey. The property values are increasing last year by 11.3%, which is phenomenal. Much higher than the industry average, the country average. Also, the projections for next year are good as well. Now, we do buy apartment buildings in Paterson, New Jersey. Home values are not a direct reflection of apartment building values, but they really, really do impact because, of course, the more expensive it is to live in an area, [clears throat] the more expensive it is to rent in an area generally, right? As home values increase, as does rent. Those numbers also speak for themselves. Some of the general numbers are in the New York City metropolitan area, which Paterson is in. All the cities right around New York City that get you into Manhattan where a lot of people live because most people who work at Manhattan don't live there. They actually commute there. These areas, a huge demand. Paterson is really one of the cheapest, most affordable places to live if you're commuting into Manhattan. Forget about the boroughs, Bronx, Brooklyn. Those are so expensive right now. You get such a small space for your money. Even in Hoboken and Jersey City, those are cities that have really flourished. At this point, those values are so much higher than Paterson. It's so much more expensive to rent there or buy there or live there that people are moving into Newark. Newark had a boom. Newark, New Jersey, yes, there's a lot of crime there and the schools have challenges. The famous Mark Zuckerberg put $100 million into the Newark schools. Unfortunately, about 75% of it was sucked up by bureaucrats and fees and it really didn't have the impact we all hoped it would, but we do think philanthropists like that. Unfortunately, I think a lot of the gridlock in Newark with the government officials caused those schools to not improve enough, but Newark has seen a boom. We've invested in Newark for years. We really have done very well in downtown Newark. Rutgers area, that's been a great place to park our capital and just watch our investments grow over time. The demand in Newark and around the universities in Newark is great. That change is really taking place there. The next thing to change in our opinion is Paterson. You can already see it happening. The numbers speak for themselves. Home values are really growing very quickly there. Listen, there's certain statistics. The schools aren't great, right? There's high crime. I get that. It's in an inner-city area. There's areas of Paterson that are dangerous. You don't want to invest there and you have to understand that about every city. You want to recognize there's areas where there's a lot of redevelopment. The city's very bullish on redevelopment. Generally, the downtown areas near the parks. Same thing is going on in Paterson that you saw in Newark over the last 10 years. There's a lot of investment coming into the downtown area. There's nicer housing coming in. There's fancy condos and apartments coming in with swimming pools. Right now in downtown Paterson, they are developing a 10-story, 206-unit apartment building here with swimming pools. This is going to be right in downtown Paterson. Awesome location. We're actually looking at a property around the corner on Straight Street. We are really bullish on this area. There's a lot of developers putting a ton of money into the area as well. The old armory in Paterson. Paterson really has a lot of history. It's a very interesting little city with the Great Falls there and everything. Very beautiful city with a ton of potential. It's really being tapped into right now. With that armory, you have an old armory right near around downtown Paterson. We're buying an 11-unit right around the corner from this building. There's been a proposal. It looks like it's going to be approved here for a number of apartments right at the old armory. Unfortunately, the building has to be knocked down. It's an old beat-up building there, so it's not safe to be used to transform into apartments. A new building will be built there and the condos will be higher-level earning higher rents than what we're charging. What we do is we buy buildings around these big fancy developments because we know that these developers put a ton of money into research. So do we, but they put even more the amount of research and due diligence that development companies go into to research an area before they put all that capital into it. Because a lot of these big developments, it's institutionalized the money. These are hedge funds. These are family offices. These are savvy investors that are putting their capital into safe markets where they see growth. They see this as a more affordable option, a cheaper place. It's a cheaper thing on the shelf, right? If you're a real estate investor and you're looking at New Jersey here, you're looking at the New York City metropolitan market, you're looking at the boroughs, you're looking at Long Island, you're looking at Newark, you're looking at Hoboken. At the end of the day, Newark's a great investment and Paterson's a great investment right now for cash flow and for growth. Hoboken is very saturated. Jersey City has a ton of activity. Still very bullish on Jersey City, but you kind of missed the boat on Jersey City. At this point, it's such a high-priced city to get into. A lot of good areas in Jersey City. It just doesn't make sense unless you're really happier. You're used to the street, which is the name of the game to get good deals. Here in Paterson, we do find that there's a lot of bang for your buck. Your dollar goes further. We're buying apartment buildings right now. We're paying about $87 per unit up to about $125 per unit for nicer buildings right now. It's not like brand-new construction, fancy apartments, but we're getting nice Class B real estate and Class C real estate for the 87,000 unit. You pay for what you get, but your dollar goes further in Paterson than it does in many other areas of North Jersey. Paterson is a much better place to stretch your dollar, get more apartments. Better return on investment by getting more apartments for less money here in Paterson, New Jersey. We follow those developers. We try to buy buildings around where these fancy developments are happening. We're doing that right now. We're buying a building near the Great Falls, a 25-unit there where there's a ton of development going on. A very beautiful park, lot of money is going into that park there as well. We also are investing in an 11-unit by the armory where it's being redeveloped if they can get their parking situation figured out. That development is going to be pushed through and then that's going to get started as soon as possible. The rents right now in the metropolitan area of New York City are $2,950. That's the average rent per month in New York City metropolitan area, the boroughs, Hoboken. The average rent in Paterson is 1,600. 2,950 versus 1,600, obviously, it's almost twice what's patched in. The rents have room to grow in my opinion. I'm not even asking 1,600 for armories. We're looking at buildings right now. We're analyzing our average rents around 1,250 to 1,350. That's a much more conservative place to be. If I got 1,450, oh my gosh, that would be amazing. The building would really just cash flow far better than we even thought. We're being pretty conservative on our numbers. The average rent in Paterson is higher than what we're asking. That's a good indication often on your properties. You want to kind of be a tick above that average rent in the city because that way, you're going to be a more affordable option for tenants. You'll have a line out the door to lease your units like we do in these cities. Let's also talk about the median home price, okay? The median home price in New Jersey is very expensive. The median home price in Paterson is $256,000, where the median home price in Fair Lawn, which is literally neighboring Paterson, is $403,000. Paterson, it's a better bang for your buck. The average US rent is $1,550. I'm asking less than that for most of my units in Paterson, New Jersey because I don't have to pay that much for the real estate. If I could pay less for the real estate, I could charge less for the rental space. I can build that rent more overtime there for showing a nice growth pattern and being able to increase the value of that real estate exponentially. When you buy low, rents are low. There's room to grow. You're in an area where there's a ton of demand. There's so many people living in North Jersey. Living around New York City, it is such a densely populated area. That's why I try to get away on the weekends because it's just a pain living in New Jersey. There's so much traffic. There's so many people and congestion, but there's a ton of wealth. There's a ton of business activities. There's a ton of opportunity. Everyone is hiring here. We earn very nicely in New Jersey. Because of that, people can afford to pay higher ransom and the houses sell for more. The income level is very high in New Jersey. Very strong numbers there as well. I think we're number three of household income in the country here in New Jersey. Because of that, our home value stays strong. Our rent stays strong. The demand for the space is high. Therefore, the values of the real estate is high. When I buy a building, I can be confident that five years from now or 10 or 20 years from now or 30 years, someone's going to want to buy that building. A lot of syndicators go and buy in areas that are up-and-coming and I totally understand that. There's definitely submarkets where you can really do very well if you get in soon and then they boom and then you get out, but those submarkets aren't really a long-term strategy all the time, right? A lot of times, you're looking at these submarkets. All right. It's going well right now. If another recession happens, some of these lesser-known cities are going to get hit first where New York City, this metropolitan market, is really just a hub of so much activity that when the market slows down-- Not if, but when the market slows down, there's still a demand to live near New York City. If there's not a demand to live New York City, I always say, "We have bigger problems to worry about than our real estate values," because that means there's some terrible crisis going on. As long as there's not some terrible crisis that completely collapses the economy, we will be safe here working off New York City. That's where I place my cards. That's where I place my bet. That's where I encourage my investors do as well. We've done very well here. The numbers speak for themselves. If you want to learn more about how you can invest in buildings in Paterson, New Jersey or other neighboring cities where we get great buildings that have low cash flow and are providing a low price, we increase the cash flow. We increase the value and our investors make really nice returns through the cash flow and through the refinancing of the building over time so that they beat the taxman. They don't have to pay income tax. They make really solid double-digit cash-on-cash returns. Most of our investors don't have to do anything. It's a completely passive investment in New Jersey apartment buildings. If this sounds like something you'd be interested in, you want to learn more about it, go to peoplescapitalgroup.com and fill in your information there. We'll get in touch with you and you come to one of our events here in New Jersey. If you're not local, then we can connect, of course, through the amazing internet. That's peoplescapitalgroup.com. I'm Aaron Fragnito, co-owner of Peoples Capital Group. You enjoy your day. I hope you enjoy this video. Subscribe for more.