“Slum” in this case means a working-class/industrial area of one of the wealthier and better-run small cities in NJ. I mean literally working-class, not welfare class. There’s a bakery that sells bread to many of the local groceries, a bunch of small shops, an old-school Italian restaurant, an auto repair place, a plumbing and electrical supplier and jobber. Many of the employees of the same live locally, within a few blocks. Ironically, there are no vacant shops in that area and haven’t been in years, unlike the main (considered nicer?) downtown drag that has eight or nine storefronts sitting vacant at any one time and bad turnover.
Think “older part of Chula-Vista” rather than “Watts or South Central.” Walking distance to very good schools, fast trains to NYC, the whole 9 years.
That area: 8% cap rate, no problem finding great tenants. Basically, if I’m smart about it, a building like that would pay my rent in Manhattan.
Manhattan: 4% cap rate (or owner equivalent rent)
