BRRRR in a C minus Area

[Patrick Tiedeken]

I live in New Jersey and am a new investor (getting into wholesaling to generate cash and then doing a buy and hold strategy). I am considering investing in an area that is a C minus (that is my estimate of the grading) - Clementon NJ. I am looking for thoughts from experienced investors (based on my thoughts below).

I drove by the property - the units look well enough taken care of. The area isn't awful but is known for some crime and drug activity, and is a lower income working class neighborhood. It isn't a "war zone", but there is crime and the schools aren't well regarded. The population is holding steady over the past 10 years - no growth but no contraction.

Current landlord:

-Bought the property for $40K in 2016 and it and others around it have significantly appreciated since

-Claims he is selling because he is moving and getting older

-Property is occupied on a month to month and he claims they would consider a long-term lease. Has tenants in the property who he claims are "great" and "always pay on time"

Note: I have not yet toured the property or asked for proof of on time payment from the current tenants 

My analysis on the deal is this:

Target purchase price: $105K (current investor is asking 125K which is too high based on comps)

Current monthly rent: $1,450

Expenses: which includes mortgage, taxes, HOA, and 5% for repairs, 5% vacancy, 5% capex (HOA does cover outside)

Monthly return: $324/month