Realtor · Monmouth County · Member since 2020 · 95 posts · 37 votes
My partner and I have been reading a lot recently about how hard it is to buy a property in New Jersey that produces positive cash flow.
We made an offer that has been accepted on a property in Perth Amboy NJ and so this sentiment has us nervous. After running the analysis we see this property is significantly cash flow positive but we can't help but feel that we might be missing something. The numbers are as follows...
Accepted Price: $275K
Units: 6
Rent per unit: $800 ($4,800 per month total)
Vacancy: $480 (10% of Gross rents); Maintenance and Repairs: $480 (10% of Gross Rents); CAPEX: $350; Taxes: $917; Insurance: $833
The tenants are paying for utilities separately so there's nothing budgeted for that. not sure what to expect for common area expenses .
You mention: "Definitely, all the apartments needs cosmetic work and to be updated. This building was built in the early 1900-1920. I did go thru it with my contractor and roof will need to be replaced as well."
So figure ~$40,000 in roof replacement and cosmetic updates for 6 units. How much can you bump rents after the updates?
I don't see a budget for Property Mgmt, so I'm assuming you will self manage, but factor in the time you will need to do showings for lease ups and other things related to property mgmt.
Who does lawn maintenance if any? Did you factor in quarterly pest control?
Class A area or Class C area for tenants? If Class C and the asset is 100 years old, repairs and maintenance will be higher unless plumbing and electrical was completely re-done within the past 20 years
@Isaura Orellana you should try the PRO section of BP to promote your business and not impose yourself under the guise of trying to chime in on my post. Its clear that you are trying to promote yourself and your business and that Amy Buckholder is a fake client. None the less, best of luck to you!
@Kyle Scully the property tax ($917) and the property Insurance ($833) are both the monthly payments I would make on this property. The insurance is actually high because it includes flood insurance, I just combined both liability and flood insurance together as one monthly payment.
One thing I don't see mentioned is to get your own insurance quotes. They may be higher then the current owner who probably is a long time policy holder. FEMA is also re mapping so look at that. Does it flood or is it just in the flood zone? Was it fine in Sandy? If so you are probably good. That is a storm that I know had an impact in the adjacent towns, not sure about Perth Amboy.
@Yonia B. This is a 6-unit, so I would think you'll have to go with a commercial mortgage, which is not going to be 30 years fixed. You're probably looking at a 20 yr mortgage at 4%+, fixed for first 5 years, at around $1200/mo.
I honestly see the commercial property status as one of the important things you will need to verify. Perhaps this is one of the reasons it is selling at such a good price? From a financing perspective, 6 unit properties are the 2nd least desirable type of property...right behind 5 unit properties. As a commercial property, your debt carrying costs will be significantly higher than with a residential property.
I don't know if the county in your area has it, but in my area, it's really easy to look up the county tax record to make sure the property's listed sq footage and number of units are consistent with what the county knows.
With that said, you are still getting something that is within spitting distance of the 2% guideline. I think you have a good mindset in that you are buying a distressed property at a good price and renovating each unit as tenants leave. That is the exact same strategy that I use. I bought a duplex last year in Toledo that was just under the 2% guideline. I felt it was risky, but I put in an offer and opened escrow on it anyway. I kept waiting for the big issue to turn up, but lo and behold, it passed the inspection with flying colors and there hasn't been a single maintenance issue. Sometimes a good deal is just a good deal. Of course, it goes without saying, hire a good inspector, get all tenant estoppels, title insurance, the whole sh'bang. I always like to be present for the inspections and chat with the tenants.
@Tony Kim Thank you so much on your advise, I am working on doing all investigations and due deligence this week. I hope I get lucky with this building as you did with your duplex. Keeping fingers crossed ;)
@Isaura Orellana you should try the PRO section of BP to promote your business and not impose yourself under the guise of trying to chime in on my post. Its clear that you are trying to promote yourself and your business and that Amy Buckholder is a fake client. None the less, best of luck to you!
I beg your pardon Sarah but Amy is a nurse from Long Beach California who has been working double shift since march putting herself on the front lines for the rest of us. How dare you make those baseless comments. I think you really need to get your facts straight before you start hurling false accusations with absolutely nothing to back yourself up with. Amy is not only a nurse but a friend, client as well as big investor. Feel free to leave your number or message it to me and Amy myself and my husband Darren will conference call you.
@Isaura Orellana conference call me??? girl please, this is not the platform for your school yard fights! I called you out and I stand by what I said. Move on!
I beg your pardon Sarah but Amy is a nurse from Long Beach California who has been working double shift since march putting herself on the front lines for the rest of us. How dare you make those baseless comments. I think you really need to get your facts straight before you start hurling false accusations with absolutely nothing to back yourself up with. Amy is not only a nurse but a friend, client as well as big investor. Feel free to leave your number or message it to me and Amy myself and my husband Darren will conference call you.
She politely asked you to go away, and it's time for you to do so.
Go sell your "Detroit dream" (to pay for you living in Los Angeles) someplace else.
We three will keep on living the dream while you haters can keep on dreaming! Hasta La vista baby. And please refrain from interacting with me again David.