Two Israeli buyers groups have purchased an apartment building in New Jersey and land for the construction of 58 housing units and a commercial floor at a total investment of $9.3 million (including the cost of construction), Yedioth Ahronoth's economic newspaper Calcalist has learned.
The groups are organized by Attorney Iram Gal.
In the two deals the groups cooperated with real estate entrepreneur Zvika Goldenberg, one of the owners of the Group GE company. Goldenberg, a former Israeli, owns dozens of apartments and has initiated several other projects in the city. His will own a 50% share of the building and housing project.
In the first deal, a group of six investors bought a 12-story apartment building in an area considered one of the cheapest in New Jersey for about $1.14 million - $95,000 per apartment including purchasing costs.
The purchased apartments have three rooms each, measure 85 square meters (915 square feet) in size, and are mainly rented out to residents of a low socioeconomic status. The flats are rented for $900 per month, but after deducting management costs and taxes the landlord remains with about $600 per month, a sum reflecting a 7.5% return on the investment.
According to Attorney Gal, the price of those same apartments before the crisis was $150-200,000 – some 35-45% higher than their current purchase price. Apart for the crisis in the real estate market, he said, one of the reasons for the low price was an agreement between the buyers and the seller that the deal would not be conditioned on obtaining a mortgage.
Deals conditioned on a mortgage are common in the US market, but these days, with the toughening of financing conditions, many sellers prefer to compromise on the price, getting in return a secure deal which is not dependant on any other conditions.
According to Gal, the area is only a 10-minute ride away on public transportation from the heart of Manhattan, and therefore the buyers believe prices will rise there. He added that the group's business plan was to keep the apartments for two years and then sell the property for a higher price.
In the second deal, Gal organized a group of Israeli buyers who purchased land for the construction of a six-story apartment building which would include 58 housing units and a commercial floor.
The land costs about $1.5 million, and together with the construction the investment is expected to total $8.2 million. The land is located near downtown Jersey City and borders a large park. The apartments have a view of the Statue of Liberty.
The investors estimate that the construction cost will total about $140,000 per housing unit, and that the apartments could be sold immediately after their construction is completed for $250,000.
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