[Calc Review] Help me analyze this deal

[Leche Hopkins]

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*This link comes directly from our calculators, based on information input by the member who posted.

Hello Everyone,

I need help analyzing this deal. I plan on doing a buy and hold. It's a quad that already has tenets in it. From the looks of the report it looks like a great deal. However, my concern is that this area doesn't have many property management companies and I'm not the hands-on type of investor especially since this property is about an hour and a half from where I live. 

I'm also fearful that maybe I missed a key component as far as a bill that should be paid monthly that could affect my numbers. Any help would be much appreciated. The property is in Cumberland County, NJ.

Leche' Hopkins

[Mike Bonadies]

Thanks for posting your potential deal @Leche Hopkins. I echo a lot of what was already said by @David Vitarelli and @Justin Eaton. That said, I personally own rentals in Cumberland county and there are a lot of "isms" that this report is not capturing. Knowing where in Cumberland County would be very helpful as there are some differences between the three major towns - Vineland, Millville, and Bridgeton. Let me dive into the regional specifics:

Cumberland County is a cashflow goldmine. There is a lot to be bought here and the multi-familes are certainly undervalued. THAT SAID, its a C to C- almost D+ area. Finding good tenants is hard, property abuse is there, crime is a problem, and the properties are generally very old. If you can manage them well they can very profitable but you need to be ready for those problems.

Property Value Assumption @ 2% - This is not true for most of Cumberland County. Property prices have stayed stagnate for multifamiles for years.  This because there aren't a ton of sales. Lots of multi-familes down there are seller financed or passed along. You are starting to see a slight uptick, but I would not assume the standard appreciation. I'd stick to .05%.

Vacancy @ 5% - Justin commented on this but in Cumberland County rental demand is very strong but you will have to churn through a lot of applicants. You many have to turn down many before you actually rent out. Vacancy should be closer to 7%

Rent Roll - You've got some upside here. 1/1s in Millville (its not too different in Vineland, Brigeton is bit lower) should be around $850. All of the units in the deal are currently under rent. Without pictures I can't say if the current conditions warrant this but you've got some long term upside in rent there.

ARV @ $170k - This is a tough one. The group of local investors I know down there beat this up all the time. Because of the lack of sales ARVs in multi-familes are naturally depressed. A quad grossing $3k should have at least at ARV of $175k but because of sales comps that doesn't always pan out. I can send you one from a Triplex I own I got done two months ago. Is a 3000sqft building that gross rents for $2800. ARV shook out to $140k

Deferred Maintenance - Again Justin hit on this but this is very common down in Cumberland county. Double, triple check all the units and especially the basement. You'll want to get a tank sweep depending on where the property is located as underground oil tanks are found. Also check the quality of the septic system/well if it has one ( I see you have a water/sewer expense but I would double check).

Water @ 5% - Cumberland county has higher water/sewer bill than the rest of NJ. Sewer is billed on the amount of the units. I'd double that bill just to be safe.

Location - If this property is not located in one of three big towns you may want to reconsider. The smaller towns are much harder to find good tenants for and the economy in the small towns are lacking.

Overall - I think this is a decent deal if you are only going in for 11k, the property doesn't have a ton of deferred maintenance and you have the grit for Cumberland county.

If you are looking for a property management company, David already offered his services and hes a good guy but we also manage and own properties in Cumberland county. Its one of the areas we specialize in. Feel free to DM me.

-Mike Bonadies