Negotiating with my Neighbor - an great 83 old Italian man in NJ

[Mark Gee]

Hey BP'ers - 

I'd love your opinion on a negotiation for a new 4 family to the portfolio. Its a nice building in Red Bank, NJ - currently brings in about $5000 in rent monthly. Its generally well taken care of but needs a bit of TLC. Overtime I think the rents could increase about 600 a month fairly easily as people move out/in.

The property has one 3 bed/1 bath, one 1b/1b, and two studios apartments. Vinal siding, Rough looks like its going to need to be replace in a couple years (16 year old roof).

The coin operated laundry brings in an additional 2k a year roughly.

Taxes 12k

Electric $500 annually

Water/sewer 2k annually

Lawn/Snow 1k annually

Insurance 2500 annually

Everything else is sub-metered very nicely.

Vacancy is pretty low, as there aren't enough rentals in the area. 

Rents are on the lower side, but nothing ridiculous. Red Bank, NJ is a rent-controlled town meaning once tenants are in, you can only raise the rent by the current CPI, currently 1%. When they vacant, the rents will 'reset' to whatever the new tenant agrees to.

How would you guys value you this property? Cap rates are low in the area, lower than other towns because Red Bank is generally a growing area with jobs coming in and very nice downtown area. Cap Rates average around 6-8% but generally I try to do better than that when purchasing.

My initial bid to my neighbor (a great older man who refers to this property as "one of a kind" b/c he's kept good care of it) was scoffed at as too low. I know how I value it, but I'm wondering how you BP superstars would value it.

Thanks very much! I'd really like to work out a deal with him before you lists it with a realtor.