Many first-time investors looking for investment properties often seek advice on what to check first when faced with listings in Palisades Park. In order, there are five main points to consider.

The first is loan conditions. Investment properties typically require a higher down payment than primary residences, ranging from 15% to 25%. While a credit score of 620 or higher may allow for approval, a score of 740 or above is needed to qualify for favorable interest rates. Generally, interest rates for investment properties are set about 0.5 to 0.75 percentage points higher than those for primary residences.

The second is rental prices. The average rent in Palisades Park is around $2,275, while other sources report it as $1,997. One-bedroom units are around $1,800, and two-bedroom units range from $2,300 to $2,400. This is about 17% higher than the national average, so it's advisable to calculate the rent-to-price ratio using the 1% rule beforehand.

• Loan conditions - Check down payment and credit score
• Rental prices - Verify actual rents in the area you plan to buy
• Property tax - Check effective tax rate and annual bill
• Tenant protection laws - Review New Jersey's Anti-Eviction Act and local ordinances
• Management style - Compare self-management and property management

The third is property tax. Palisades Park has relatively low property tax burdens within Bergen County. The effective property tax rate is about 1.54%, and the annual property tax bill for a $415,000 home is approximately $8,922, which is considered low within Bergen County. However, if you only look at rental income and check property taxes later, you may encounter unexpected expenses, so be sure to verify this before purchasing.

The fourth is tenant protection laws. New Jersey has an Anti-Eviction Act that applies statewide, meaning you cannot evict tenants without just cause. Rent control is not a statewide system but is managed by local ordinances, so it's safest to check with the borough office to see if such an ordinance exists in Palisades Park. First-time investors from other states often overlook this aspect, so be particularly attentive to it.

The fifth is management style. If you're new to investing, considering hiring a management company instead of managing the property yourself can be a good option. Typically, 8% to 12% of the monthly rent goes to management fees, but they can handle tenant screening and compliance with rental laws, reducing the burden for novice investors. Additionally, it's wise to prepare for landlord insurance and set aside maintenance reserves of about 1% of the property's value each year.

It's also helpful to know that lenders typically only recognize 75% of expected rental income as income when planning your finances. If you consider selling later, you might want to look into the 1031 exchange to defer capital gains taxes.

The cap rate, calculated by dividing net operating income by the purchase price, is another important concept for first-time investors to understand. By calculating and comparing the cap rates of different properties side by side, you can see that a property with high rent may actually have lower profitability than others. If you're unsure, start by organizing the cap rates, property taxes, and management fees of several properties into a single table.

After checking these five points in order, finally request the actual rental history and original property tax bills for the listings to verify them visually. There can be discrepancies between the estimated rent provided by the agent and the actual rent stated in the lease, and property taxes may have changed due to recent reassessments. For those preparing to invest in their first property, developing the habit of verifying each document can significantly impact your returns over the following years.

This article is not investment or legal advice, and tax rates and rental ordinances may vary based on local conditions and property specifics, so please consult a real estate professional and accountant before finalizing any contracts.