Newbie wants to buy SFHs in affluent area of NJ, but cap rates too low?

[Andrew S.]

Hi smart real estate investors...

Newbie here. Quick background: I have great day job, and high-pay profession, on track for retirement, but when I almost bought a deferred annuity for $550k (starts paying around 40k/year in 12 years), I realized - wait, I should buy rental properties with that cash instead!  I also just got a business cash windfall of around 800k...

So I'm looking at 2 2 BR SFH - in my neighborhood with 400-1.4M homes, each around 220k, and each with tax around 5500/yr and potential rental at 1900/month. I'm also looking at 2 4 BR 430k homes, with taxes around 6600 and rental income at 3k/month.

I know none of these properties pass the 50%, 55%, 2% rules, but they are in solid areas with low rental inventory, top schools.  The 2 2BR properties would each bring in 12k after assuming vacancy/tax/insurance/maint, or 12k/220k = 5.4%. 

The 4 BR 430k properties would each yield 20k/430k = 4.6%

I want to diversify into these properties since I have healthy fear of stock/bond downturn, and I enjoy the work (had a few rental homes in my past). The $440k homes are actually homes we may move into for 5 years to enjoy the excellent high schools. 

Have separate question of cash or leverage, for another time....

thanks!