Jersey City (The Heights) Deal Analysis

[James F.]

First time poster, long time follower. Looking at a potential investment in Jersey City (The Heights) and could use some more eyes to see what I'm missing. Details and analysis below. Any feedback is much appreciated (especially expenses). I'd move into one of the units after my current lease expires also.

Location: The Heights, Jersey City
# Units: 3 (each separately metered) - all vacant 2BR/1BA (2,646 SF total)
Asking Price: $705k ($235k/unit or $266 PSF)
Renovation Cost: $54k (units are in good shape. GC went through and said $44k total for floors cabinets, some capital items, etc not doing crazy finishes. Added a $10k buffer)
Total Cost: ~$805k (includes closing costs, rate buy down, commissions, two months of carry costs)
ARV: ~$900k ($300k/unit or $340 PSF)
Rate: 30yr 3.375% - quoted 3.625% to 3.875%. Can buy down the rate for $5k to 3.375%
LTV: 75%
Rental Rates: $1,900 per unit
Forced Equity Gain: ~$94k
Ongoing COC: ~5.5% (untrended)

Thanks,

James

[Farrukh Amini]

Hey James,

Your expense estimates seem pretty standard for the area. The only one that seems lower is water/sewer. In my experience that’s gonna be much higher than $420 for a 3 unit building. 
You could also look into sub metering each unit and eliminate that expense all together since you’ll be rehabbing the units anyways. 

Overall, I'd say CoC is too low but that's me. If this is gonna be your first investment then the numbers might work for you. Keep in mind though that when you house hack you have to account for the lost income on one unit, but again you'll be eliminating your current rent expense.

Also, this looks like a pretty marginal deal. We are in an interesting time so I’d consider holding on to my cash and waiting to see what’s gonna happen to the market - maybe you can get better deals down the road.