Should I Do This Deal?

[Adam F.]

This is would be my 3rd buy and hold property and I'm not sure what to do here:

4 Family listed for $750k. The seller expressed she won't take anything less than the asking price and clearly is not in any rush to sell. My first offer was 670K, no counter, then I offered 720K, still no counter. Very solid property, a little dated but in good condition. Fully occupied with 2 long term tenants (7+ years).

Location: The house is in Highland Park, NJ. Great location. It is a nice, quiet neighborhood with good schools right across the bridge (about a mile away) from downtown New Brunswick which is a city home to Rutgers, RWJ Hospital, Johnson & Johnson, NJ Transit train to NYC and a lot of development going on including a brand new theater and a huge development project at the train station which will include shopping, food and apartments. The renter pool for this area seems to be university faculty, grad students, commuters etc. 

Now for the numbers:

Current Rents: $72,108 ($68,502 with 5% vacancy)

Taxes: $16,759

Insurance: $1,234

Maintenance & Cap Ex: $3,268

Owner Utilities: $2,400

I am managing myself.

With these numbers, the cap rate at that price is about 6% which is pretty good for the area in today's market, and thus how the seller is justifying her price. However, with a 30 year 70% LTV mortgage the cash on cash return is under 4%. I'm concerned that is too low, although I realize it would increase over the years and would be consistent income.

A few other factors: I believe the rents are below market value. I believe I can get closer to 78k per year based on comps. Also, there are 2 garage spots that were never used by the tenants (they were used for storage by seller, and there is enough driveway space for tenants). I believe I could rent each of those for at least $100 a month which significantly changes things. Parking is tough in New Brunswick, and this may be a good more affordable alternative. However, I am not 100 percent sure this would be consistent income so it's kind of a gamble. There's also coined laundry, but I assume that income is miniscule. 

If I factor in the raised rents and garage income, the deal works for me at 750k. The COC return becomes about 7.3%.

Should I just walk away from this? I know people look for COC returns of over 10% or even 15%, but in my market that is really tough so I am okay with really any return over 6% in a long term play. I don't want to miss out on this great property because I'm too focused on a few percentage points of return, but at the same time I don't want to make a mistake and overpay for this property.

Thank you so much!