Help evaluate this NJ deal!

[Danny Liu]

Hey BP! Fairly new to the forums and on the fence about this deal-- hoping to get some advice!

I've been negotiating with the seller for a month now and I got the price down to $625k. Initial price was 750k. I've put down a conservative $700k ARV.

It's a duplex with an unfinished commercial space (500 sq ft) on the first floor, and two residential the second and third floor. There is a difficult month-month tenant in one of them (a month behind on rent, always late to pay), and a good month-month tenant who's always early on hers. 

Unit 1: Rented at $2000/month with market value $2400/month

Unit 2: Rented at $1860/month with market value $2400/month

Commercial space can be rented at $1500 - $2000/month

After taxes I'm looking at a 0.75% monthly return fully occupied, which is quite good for this area where appreciation has been well over 5%/year in the last 10 years, brand new units are being built by big name construction companies, and units rent within the week. I can also update the residential units once they are vacant for a healthy uptick in my rent. The downside here being the unit is on a busy two-way road, close to two major junctions where commuters regularly drive through on their way to manhattan.

Assuming the most conservative rental numbers and the worst-case capex expenses, I'd be at a 5% cap rate and a negative cash flow of around $ - 500/month at this price. I could write off the loan's interest against the income I make from my independent contracting business. I'd also have the cash to put 45% down and turn cash flow positive in a year, if interest rates don't fall. Once they do, I'll refinance into a cheaper rate and 100% turn CF positive.

Talks between the seller have gone a little stale. Is this a good deal at this price? If not, how low would you push?

I'd really appreciate some opinions from the pros :) 

Danny