Realistic Numbers in NJ?

Question

Good morning BP Community. I live in Union County NJ, I'm looking into purchasing my first property and I was looking for some feedback on how I inputted these numbers.

I'm familiar with what the terms mean, but the things that I don't fully grasp are the actual numbers.

Any feedback is appreciated :)

https://www.biggerpockets.com/calculators/shared/3...

Joseph Kaiser · Answer

Hey @Kevin Izquierdo,

The rents seem a little low for Rahway, how big are the units? As far as the repairs, you also need to consider the cost of material, permits (if needed,) etc.

To me the cashflow number seems low for the amount of work and money you're putting it out, and for a 3 unit building. The cash on cash ROI also seems kinda low. I'm pretty new to this all too, but that's just my two cents about it.

I'm definitely interested to see if you get any other feedback on the deal, I'm also in Union County and just starting to get more into this.

-Joe

Jaysen Medhurst · Answer

Hi, @Kevin Izquierdo, I live in NYC, so I know how crazy things are around her right now. A few things about your analysis:

Vacancy is probably a bit high. 8% is pretty standard.
Bump your repairs maintenance to 7%
What about shared utilities (like hallway lights), lawncare, snow removal?
Is flood insurance required?
Management is usually 10%
Taxes are killing you, which I'm sure you know. Very high for that price point. Have you confirmed them with the town?

You need to account for appreciation in your full analysis. Right now you have the value flat over 30 years.

I think the real question is, how are you adding value? You don't plan to make improvements, increase rents or lower expenses. You can't expect to generate cash flow without adding value and only putting down 5%.

Joseph Kaiser · Answer

@Kevin Izquierdo

It's hard to tell without looking or seeing pictures, but I imagine if the units 1 and 2 are just one bedrooms you should average at least 900/month, if not more. Depends on their condition and what utilities are included. Close to the train like that should be good, esp. if it's a nicer street. I know it's hit or miss over there.

As far as repairs, it really depends on what you want to do to the units or how bad they are (if they're beat up vs just improving)

I'd have your agent pull up some comps for rentals to give you a realistic pricing for each apartment. It may be helpful to work backwards (which is what I try to do) and see, if the apartments generate 3000 a month, minus your fixed expenses (such as insurance and taxes, mgmt and vacancy, etc.), what should you pay for the house.

Kevin Izquierdo · Answer

@Joseph Kaiser Thank you for responding !

Very good question about how big the units are. I checked the MLS listing that was sent to me but unfortunately there is no SQ FT listed.

I do know that:

unit 1: 3 rooms, 1 bed, 1 bath

unit 2: 3 rooms, 1 bed, 1 bath

unit 3: 2 rooms, 1 bed, 1 bath

Yea, i purposely left out repairs because I dont exactly know how to calculate them. I imagine if I do include them, the cash flow would return to negative. With all these questions that are being brought to my attention, I'm starting to believe the same thing: the cash flow is pretty low for the amount of work Im putting into it.

Are you looking to purchase a property as well?

Thanks for the feedback

Kevin Izquierdo · Answer

@Jaysen Medhurst thanks so much for the feedback!

Glad you rose the questions of Lawncare, snow removal, etc.. Ill be sure to ask my agent about those as well.

I doubt flood insurance is required, but its definitely something I have to research along with the taxes.

I opted out in filling out the appreciation information because thats something that I dont know anything about. Yet another question to bring up :)

I plan on making repairs to the units to raise rent.

the rents were: $1,225 / $750 / $550  and I raised the numbers to what I thought wouldnt be too much and I would at least come out with some positive cash flow (or at least break even).

Also, these raised rent numbers are not backed by any knowledge or research, I was plugging in numbers to see what it would take to make this property cash flow positive.

I plan on doing the repairs myself but I'm not quite sure how much all of the repairs would cost either.

Nonetheless, thank you very much for responding. From just your response youve helped me think of a lot of necessary questions to ask my agent. I appreciate it :)

Realistic Numbers in NJ?

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