New Jersey Deal for Duplex, good?

Question

Hey I'm new to BP. I am from NJ. I am looking at a well maintained duplex listed for $360K. The rent for each unit is about $1,225. It is in central jersey in a nice blue collar town. There a huge front and back yard and a detached 2 car garage. 2 Bedrooms On Each Side & Full Basements

I think the asking price is high, but I would like to know what people think about what would make this a good deal.

Account Closed · Answer

• RE Taxes are $4600 per unit ($9200 total).
• Intentions are buy and hold for cash flow.  Would occupy one side, but my wife doesn't want to.
• There is a separate 2 car garage which i am looking into if the township would allow turning into a studio.  Looks unlikely
• There is 1 tenant who is paying $1225 for one unit.  The other is very similar but vacant.
• NJ seems to be extremely thin margins if you are not in a ghetto area.  What is the best way to find a deal?  What is a good deal in NJ for Cap Rate and COC?

Tom Goans · Answer

@Kinjal Amin,

The asking price is irrelevant. The acceptable price you can pay for an investment opportunity will be determined after you conduct extensive research.

• You must first determine who is the target market.      From this, you then determine the realistic      rental amount. This will also help you to best structure the payment      schedule to ensure timely payments.
• Determine the demographics.
• Determine the stability of the primary employers.
• Determine the stability of the neighborhood.
• Determine the realistic cost of ownership.
• Determine the realistic cost of repairs, maintenance,      and enhancements.
• Determine your acceptable risk and workload vs.      reward regarding this property.
• Determine how this investment fits into your business      plan and adds to your goals.

Now you have a better understanding of the appropriate amount you can pay for the property.

Two added comments:

• "about" is a word that should not be a part of any investment analysis - especially when determining the cash flow.
• Yards and basements are not important unless it is something the Target Market wants. Like swimming pools, they turn into more work than they are worth. It will be your responsibility to maintain the yards if you think they are important and want it done well.

Rafael Norat · Answer

Kinjal,

Are your intentions to rent long term? Sell?  Occupy?

Chris Haas · Answer

I can't see you making enough money with that sales price to make it cash flow.  Also what are the R/E taxes?