Opinions on First Property

[Seth Lipper]

Hello BP people!

As you can see, this is my first post and I am new here. I certainly wish I knew about this website earlier on, but better late than never! I recently purchased my first investment property, a 3 family in Union City, NJ. It is an area in which I believe property values are going to skyrocket. It is in the same areas as Jersey City and Hoboken to those who are familiar with the area and only a 15 minute bus ride into NYC. 

With that being said, this was my very first property and I want some honest feedback. I don't think I did terrible, but I would still like some advice/opinions. A little back story on the place, it was originally part of a church monastery and subsequently converted into 3 condos. Upon buying the property, it was converted back to a 3 family home for tax abatement and future leveraging purposes. In the future, a little money and filing paperwork is all it would take to convert it back into 3 condos. In terms of improvements on the property, I had a wrought iron gate/fence installed, security cameras, and glass shower doors. I will need a new roof in about 2 years. Everything else is turnkey - chef kitchen, wood floors, 16 foot ceilings, 2 units have skylights, everything separate meters, new water heaters, new appliances, etc. I essentially purchases someone's flip. Next time, I will have a team and we will do the work for half the price!

The purchase price was $800,000. Units 1 and 2 are both 1bed/1 bath and unit 3 is a studio. Unit 1 is currently rented for $2,100/month and Unit 2 is currently rented for $2,000/month. I am living in Unit 3 for 1 year and will be renting it out next year for around $1,900. Currently, cash flow is $4,100/month, but will be $6,000/month in the future. Cap rate is around 6.5%, based upon my calculations

The 1% rule has not been met as 6,000/800,000 = .75% but as I mentioned, I am receiving a little less now due to living in the place for the year. However, I put approximately 40% down and did a 30 year finance on the remaining. I am currently managing the property myself and have certainly learned a lot. After taxes, mortgages, and expenses, I am clearing about $700/month.

I am concerned because at the end of the day, any property can be a cash flowing property if enough money is put down. In addition, while taxes are about $7500/year now, in 2024, the tax abatement ends and taxes will be about $22,000/year.... Ouch! With my calculations, at max tax rates, not increasing rents, and all else remaining equal, I will still be clearing around $1,000/month.

Is there any additional information I need to provide for feedback? The good news is that I can always utilize a HELOC to leverage the property if another opportunity arises.

Thanks everyone and I am looking forward to your responses!