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.