Well maintained 4 family home in NJ for $600k, worth it?

[Beily Pan]

Hello!

My husband and I are looking to make our first offer and have been wavering on a property we saw recently. Is this worth it for our first property? Here are the numbers:

• 4 family house listed at $600k
• 2 units will be vacant (1 bedroom and 3 bedroom, total potential income estimated to be $2700/month)
• 2 units are month to month (could potentially go for $1300/month, currently at $1000/month)
• Taxes are $10k
• Insurance estimated to be $2k
• Water and sewer is $1k/annual
• Utilities are paid separately
• We could get a mortgage for 10% down, approx. $2700/month
• Annual revenue assuming potential rents = 2700+2600 = 5300/month at 90% occupancy = $57,240
• Annual expenses = $10k + $2k + $1k + $2.7k*12 = $45,400
• Potential profit = $11,840 
• ROI = 20%

The ROI looks good (because of the 10% down), however the cash flow feels low. We've heard $1k/month is pretty good for NJ, however it feels low to me.

This is the first time we're investing in real estate as well so we don't know what we don't know. 

However, this house is well maintained (seems like it would require little work) and has potential to be bigger (unused attic).

Anything we're missing? Should this be the first property we invest in? 

[Jaysen Medhurst]

Hi Beily, 

You're missing a few items from your expenses:
Repairs (~7.5% of Gross Income) $4770/year
Capital Expenditures (~7.5% of Gross Income) $4770/year
Utilities, there will be some, if just lights in the hallways/outside
Lawn care/snow removal
Trash removal?
Property Management (10% of Gross Income) you should include this, even if you'll do yourself
PMI, is that included in your $2700/month mortgage payment

Not looking like a great deal from my POV