If you are looking for a good place to start as a landlord, New Jersey could be your place. The state is business-friendly for first-time landlords and those who want to expand their portfolio in a new area.
However, even if becoming a landlord involves a similar process throughout the United States, each area comes with unique legalities.
This guide will explain how to become a landlord in NJ and elaborate on every step involved in building a successful rental business in this state.
Is it worth it to become a landlord in NJ?
Real estate is all about location location location. Where you choose to invest in rental properties is probably the most important factor in your returns and the long-term development of your business. Today, the rental market in New Jersey is stronger than ever before.
The homeownership rate has reached 64,3%, and the average rent in NJ cities is generally higher than the national average rent ($1,972 for a two-bedroom apartment). Equally important, NJ it’s certainly not a state where you’ll run out of tenants – with 71% of its population living in rented homes. Therefore, NJ is one of the most opportune areas to invest in real estate.
Related fact: At this time, there are 43 million renter-occupied housing units in the United States.
In addition, some NJ cities have incredibly high rents, such as Hoboken at $3,531, which is approx 56% higher than the national average rent for one-bedroom apartments.
Other smaller cities such as Canford have an average rent of $2,956, and South Orange – $2,477, have rents almost as high as big cities like New York, San Francisco, or Boston.
Steps to Becoming a Landlord in NJ
Becoming a landlord in the Garden State can be a rewarding decision in the long run. To obtain favorable returns from renting your properties here, you must understand the overall process and how to implement each step precisely.
1. Invest in a property
Purchasing a property is a decision you should not take lightly, especially if you plan to use it for rental income.
If on a tight budget, is it best to purchase a property when prices fall, and interest rates are at historic lows.
However, this is not the only factor. Real estate trends drive the market in NJ as with any other state.
Location determines the supply and demand for rentals, rental income, expenses, and ultimately the return on investment. New Jersey is a great spot for first-time real estate investors and others with a limited budget with relatively low property prices.
While the real estate market is trending up in NJ, there are many profitable areas in NJ where you can buy an income-generating investment property at affordable prices. According to realtor.com, cities like Clayton (222K), Stratford (202K), Gloucester City (150K) are a great deal for those who do not have much money for the initial investment.
However, the more expensive cities can be good places to invest too. Some cities, including Newark or Jersey City, have a median house price exceeding 400K. That’s because rents (and typically the return of investment) are much higher here.
2. Prepare your property
As a landlord, you must do everything you can to ensure that your properties are in good condition before tenants even start looking.
Therefore, you should prepare your properties by fixing damages and ensuring the place is safe for your residents.
New Jersey law requires landlords to keep their rental premises livable under a legal doctrine called the ‘implied warranty of habitability.’
A habitable home should have the following:
- A roof that protects from weather.
- Reliable heat.
- Proper lighting.
- Suitable air conditioning and heating units.
- Sturdy floors and walls that aren’t in danger of imminent collapse.
- No significant danger from environmental hazards such as lead, asbestos, and mold.
- Reasonable protection from criminal intrusion.
In NJ, tenants have several legal rights to defend themselves if landlords fail to care for maintenance issues. Tenants rights include:
- The right to withhold rent until repairs are made.
- The right to ‘repair and deduct’ (dealing by themselves with repairs and then deduct their cost from rent).
As an NJ landlord, you should understand and respect these rights
3. Decide how much rent to charge.
The first and most important thing you can do is take a look at the comparable rents in your area.
Rental properties are typically priced according to the square footage occupied, with higher prices for large properties and rentals near transit.
Some factors influence the rental’s profitability, including:
- Property taxes
- Vacancy rates
- Property maintenance
- Proximity to interest points.
4. Market your property
To successfully promote your rental unit, you’ll need to craft an ad that appeals to potential tenants based on certain qualities, such as location or amenities, and use high-quality pictures. Some ads can require only a picture and a brief description. But depending on the strategy, you are using, it may be better to use more.
Related fact: To create a great online listing for your rental property, you should avoid writing your text in ALL CAPS, use ellipsis and exclamation points, a very long description (usually exceeding 4-6 sentences), and vague language.
However, not everyone knows how to market their property, so if you feel overwhelmed by this task, you should seek the help of an advertising specialist.
Methods to list your property include:
- A real estate agency.
- Rental websites.
- Social media platforms.
- Print media.
If you are looking for a free listing service in New Jersey, you can list your unit on the New Jersey Housing Resource Center website by registering there and following their instructions.
5. Screen prospective tenants
Landlords need to get the best tenants possible. Often, it is hard to tell the difference between a good tenant and one that will cause problems such as non-payment of rent, inadequate behavior, conflicts with neighbors, property damage, and more.
Therefore, the goal of the screening process is to identify problematic tenants who may not only refuse to pay rent but also threaten the safety and security of your property. The screening should focus on income information, reference check, assets, credit history, and criminal records.
If you don’t properly screen your tenants, there could be very good chances of getting stuck with some problematic people who will be challenging to evict easily. You may even face legal troubles. Hopefully, you don’t have to evict a tenant. Here is a guide on how to write a notice to vacate.
6. Sign the lease agreement
This document defines the terms and conditions between landlord and tenant. It enables landlords to recover their investment in a rented property and also ensures that any damage caused by tenants is compensated.
The rental agreement sets out general terms and conditions. This includes the basic rules of rent collection and maintenance, such as when you will be entitled to do repairs, the rules on rent increases, the due dates for payments, the steps to follow to terminate the contract, and how much rent they have to pay.
In New Jersey, rental agreements are usually required for tenancies of more than 12 months or longer. Even if the agreement is shorter, any landlord should have a written agreement. This will help avoid any legal complications and provide more credibility for their tenants.
Moreover, specific stipulations must be covered in the lease agreement in this state. Such stipulations include:
- Occupancy conditions.
- Security deposit amount.
- A detailed description of the rental space.
- Automatic renewal.
- Renters insurance.
- Crime insurance.
- Penalties for late payments.
It must be drafted in a clear, concise, and unambiguous manner. To draft an effective rental agreement, both parties must understand each other’s contract terms in full clarity.
They must have a thorough understanding of their rights and liabilities under the agreement and how such clauses will affect them.
7. Take landlord insurance
Homeowners’ insurance does not cover all damages and emergencies. It does not even cover all damage from natural disasters and fires.
If the property serves as your primary residence, homeowners insurance will be everything you need. But if you’re renting it out, you’ll also need landlord insurance.
Homeowners’ insurance doesn’t cover rental properties, so having a landlord policy will avoid unnecessary expenditure on repair costs by covering them and providing some additional security against these types of risks.
A standard homeowners insurance policy in NJ typically provides coverage to repair or rebuild your home after it’s been damaged, whether by smoke, vandalism, fire, theft, or weather events.
A landlord policy could protect your property from any accidental damage, including (See Our Coverage Faq):
- Damage during the tenancy.
- Possible natural disasters like floods and earthquakes.
- Burglary or theft, and more.
Get Landlord Insurance: Recieve a free no-obligation quote from us in just a matter of minutes!
NJ laws you should know.
There are laws in every state which regulate how landlords can manage their properties. If you decide to become a landlord in NJ, you have to learn how laws are applied in this state to use them as a guideline when dealing with tenants and whenever you have to make decisions regarding your business.
Here are some of the laws you should always keep in mind:
New Jersey State Law Against Discrimination
Discrimination is still widespread and can lead to severe consequences, sometimes even legal consequences. The NJ legislation guarantees every person equal protection under the law so that no one can be treated differently, and every landlord must respect that.
Therefore, Landlords cannot choose tenants based on:
- national origin
- marital or domestic partnership or civil union status
- sex and gender identity or expression
- affectional or sexual orientation
- family status
- source of lawful income or source of lawful rent payment.
Required Landlord Disclosures in New Jersey
Disclosures are a necessity in any rental agreement. However, it is essential to ensure that you have done your homework and have the most up-to-date information about your state disclosures.
As a residential landlord in New Jersey, you must disclose information regarding the following:
- Name and addresses.
- All known lead paint hazards and any latent risks affecting the life of the premises.
- Information regarding whether the rental property is in a flood zone.
- Domestic violence situations.
- Give the tenant a duplicate of the Truth in Renting Act regarding tenants and landlords’ legal rights and responsibilities.
- Notice about tenants’ right to request window guards twice a year.
- Information about the availability of crime insurance and where insurance applications may be found through the Federal Crime Insurance Program.
New Jersey Security Deposit
The security deposit in NJ is usually one and a half month’s rent. Landlords may be able to keep all or a part of their tenant’s security deposit in case of unpaid rent or extensive property damage.
A landlord must give back the tenant’s security deposit within 30 days after leaving the rental property and within five days in case of fire, flood, condemnation, or evacuation.
If there are any increases to the monthly rent, the landlord can raise the security deposit to match this rent increase. In addition, they cannot ask for more than a 10% increase in the security deposit in any given year.
Moreover, the landlord cannot make any deductions from the security deposit until the tenant has moved out of the unit.
New Jersey Late Fees
NJ laws require landlords to state in the lease any late fees. There is no grace period for paying rent before charging late fees, the only exception being senior citizens with special benefits ( 5 business day grace).
Other than that, landlords can charge late fees whenever they can apply. Late fees can include non-payment of rent in full on time or failure to pay utilities, or late fees for repairs that were not made promptly.
Most of the reasons landlords evict their tenants include:
- Non-payment of rent.
- Disorderly conduct.
- Occupation after the lease expired.
- Property damages.
- Violation of lease rules.
In New Jersey, the landlord must give the tenant a 30-day written notice that must contain a demand to stop any offending behavior before eviction for any reason other than non-payment of rent. Then, if the tenant doesn’t take any action, the landlord can end the rental agreement at the end of 30 days by filing an eviction lawsuit.
Becoming a landlord in New Jersey is not very different compared to other places. However, there are some unique legal circumstances and differences in the rental process that you should consider first.
We hope that our guide on how to become a landlord in NJ has been helpful and has given you the desired insights into how to approach each step successfully.