Is this a good deal for a duplex in NJ?

[Henry L.]

I'm looking at a duplex property built in the 1940s that's about $200K in NJ, and thinking to put in 20% down. I even put in a lower ARV of $175K to see if the numbers would still work -- they did.

Here are my numbers:

• Low rental estimate of $2400/mth.
• Expenses estimate of $2226/mth (see assumptions below)
• Monthly Cash Flow = $174; using 50% rule = $425
• Income / Expense Ratio (2% rule) = 1.14%

My question is, why does this deal seem so favorable?  Am I doing it right?  

I felt I used very conservative assumptions:

Repairs estimate $10K.

Mortgage interest 4.2%, so P&I = $775 / mth.

Taxes = $404 / mth

Vacancy Rate 10% = $240 / mth

Ongoing Repairs 5% = $120 / mth

Capex 5% = $120 / mth

Misc Expenses = $567 / mth (I just made up this number).

Thanks for all of your help, BP members!!