Deal Analysis - Gloucester City NJ

[Joe P.]

You know how this goes -- I found a property on the market for over 400+ days, no pictures, figured I would give it a shot and visit it. Sure enough, this appears to be a good option for an investment property. Here are the financials:

Conservative Financial View:

Sales Price: 102,900, 25% down (assuming 5.25% interest rate on 30 year fixed)

C Unit in C Neighborhood, increases in quality could improve rent by $100-$200 p/m, estimated.

Income:

• 2 units, total rent is $1750 per month / $21000 per year

Expenses:

• PITI: $891 per month (426 mortgage, 80 insurance, 345 taxes)
• PM: 10% / $175 per month (I will be managing for the foreseeable future)
• CapEx: 10% / $175 per month
• Maintenance: 8% / $140 per month
• Vacancy: 8% / $140 per month
• Water: Assumption is $100 per month
• All other expenses covered by tenants

The numbers

• CFPD of $84.50 per month / $1014per year
• CF of $129.00 per month / $1548 per year
• COCR of 6.57%

Value Add:

• Rents are low for this area -- rentometer, Craigslist, and 2 BR comps indicate 2 bedrooms should be in the 1000 to 1100 range per month.
• Increasing rent to even 950 per unit brings monthly income to $1900, COCR of 10.30%

I think my underwriting is conservative, and the expenses "saved" from PMing to start obviously add to the cash flow. At $1750, COCR is 13.37% without PM costs.

Any thoughts? I don't think its home run territory, but after seeing many properties over the past 4 months this seems like the best I can come up with.

[Lana Lee]

Originally posted by @Joe P.:

@Lana Lee no refusal - the seller is taking a job that requires him to travel and he didn't want to keep as many properties. My guess is he is selling the properties that are work for him or aren't performing as well as he would like. He mentioned he had a buyer who's financing fell through and it went back onto the market. There were also no pictures.

I'm the first person to be skeptical, so with an earnest money deposit that is refundable post an inspection, I think I am in good shape.

 Keep us posted. would be interesting to know how it workes out for you.