Need deal feedback in Westville - am I missing something?

Question

I've been spending a lot of time analyzing deals over the past few months and ran into a potential one on Roofstock. I realize I run the risk of notifying more people about the exact property but at this point I value the education more than the potential deal.

https://www.roofstock.com/investment-property-details/new-jersey/302-hazel-ave-westville-08093/1742705

Both cap rate and cash-on-cash return look promising. Active tenants that pay for most utilities, recently refurbished, etc.

Some red flags from me: currently two couples living in what is technically a single family home. Without separate entrances or a party wall, I'm guessing it'll be hard to maintain this setup with future tenants.

I don't know much about Westville. When I take a look at Zillow, there seems to be a number of open listings for rent that have been sitting vacant for weeks if not months (even with lower rents than the one here). I'm assuming the area isn't a popular place for renters.

Any advice from others who know the area / have experience analyzing more deals? Is there something I'm missing or other things I should be looking into?

Jason

Mike Bonadies · Answer

Thank you @Ian Livaich and @Joe P. P. for the mention!@Jason Baik I love Westville, I own and manage a bunch of properties in that town and it is one of my favorite towns for investments in South Jersey. Its directly in the path of progress and it's got a very solid B- demographic which is excellent for the average purchase price for the door there. Its a fantastic town to get multi-family properties in. Its very investor friendly and whenever they get to building the new light rail it will be first stop in Gloucester County which will give a huge boost in accessibility. Plus Gloucester County taxes are a bit lower as well as water bills versus Camden county which this is right next to. There is a TON of rental demand in Westville. We fill units in one to two weeks with a strong tenant. The number one negative of Westville was called out correctly by. A lot of the town is in a floodzone. On the street you are looking at I believe you are not in the flood zone so you should be safe, but they always re-draw lines and your could end up in.Now to your deal specifically. Bottomline, its overpriced. In Westville your purchase price per the door should be no more than 75k to 80k and that includes rehab. At 130k this is well overpriced. You can pick up duplexes for that price and bring in more income. 130k for a 4/1 is pretty much ARV in that area (maybe slightly under by 20k-ish). You are right about rent. 4/1s go for $1,500, you might get a bit more but the $1,600 something you enjoy now with the two couples will not continue once they move out. If you move slightly up north to Gloucester City or more South to Woodbury you can get lower priced duplexes but worse tenant demographic. There are multis in Westville that can be picked up as well and that's a better use for your money. You are paying almost 6k in taxes for this SFH. I personally own three duplexes in Westville and each of their taxes are around 6k but there is higher cashflow. If you can pick this up for 80k, or if you are looking for a turn key, 100k that would be a better deal.Again, love Westville, great area to invest in but you just need to buy at the right price there.

Jason Baik · Answer

@Mike Bonadies @Joe P. @Brett Baginski @Ian Livaich Appreciate you all taking the time to help provide perspective and pointing me towards the right people - I got a lot of really valuable knowledge. You all are a big part of what makes this community so great. On to the next deal! Thanks again.

Ian Livaich · Answer

@Mike Bonadies is your guy for all things Westville. Good luck!

Joe P. · Answer

A few things, since I have a duplex barely a mile north in Gloucester City. 1. Prepare to pay flood insurance; your lender will require NCIP or NFIP flood insurance. I have a great mortgage guy I used that allowed underwrtiting for NCIP which is cheaper than NFIP. 2. I'd say plug these numbers into a spreadsheet and run numbers on your own. I think the potential expenses they put up are low. I'd recommend 10% CAPEX, 10% maintenance, 8% vacancy, $150 a month for management, and you are likely responsible for water/sewer, and any township costs, and that could be 1200-1500 a year. In other words, run your own numbers and see if this still looks good given the taxes, your estimate for debt service, etc. 3. 4 bedrooms is weird -- not a lot of people need 4, a lot of people need 3. You may only get 3-bedroom rent in this area. 4. Make sure you're prepared for some repairs/maintenance going into this deal. I don't see any interior pictures and that is pretty telling. $10,000 set-aside should be enough, but you never know. You could be dealing with needing a new bathroom and kitchen and that could burn through 10k real fast. There are a few folks who have good experience in Westville and the SJ area...@Mike Bonadies comes to mind as the primary. I think he PMs some properties in Westville and could provide more neighborhood/renting information to help fine tune your numbers to evaluate this deal.

Brett Baginski · Answer

How far are you from driving down and seeing the property? The area doesn't seem ideal, lot of auctions and foreclosures listed on Zillow. Almost looks sandwiched between 3 highways that run through the area and if you look on the satellite map view there's a huge oil container field right down the road.