Positive Cash Flow in NJ?

Question

I have been reading a lot recently about how hard it is to buy a property in New Jersey that produces adequate cash flow or even positive cash flow.

I am about to make an offer on a property in NJ and so this sentiment has me nervous. After running my own analysis I see this property is significantly cash flow positive but I can't help but feel i'm blatantly missing something. The numbers are as follows...

Offer Price: $275K

Units: 6

Rent per unit: $800 ($4,800 per month total)

Vacancy: $480 (10% of Gross rents); Maintenance and Repairs: $480 (10% of Gross Rents); Capex: $350; Taxes: $917; Insurance: $833

The tenants are paying for utilities separately so there's nothing budgeted for that. I am not sure what to expect for common area expenses to be fair.

Mortgage: $898

Total monthly cash flow of $842.

Any insight on what I am missing?

Mark F. · Answer

And $10k per year for insurance on a 6 unit? That seems extremely high.

Mark F. · Answer

I'm not very familiar with New Brunswick and I assume the property is located there. The reason why people say that about NJ is because that price point is well below anything that isn't a full gut reno, especially at 6 units. Hell even 3 units at $275k is normally full gut.

What class area is this? I can only imagine it being a D- or else you found a screaming deal. In Newark, the worst area close to me, you can't find a 6 unit fully rented that cheap. Again even in that area a 6 unit rented out would be over $500k. So there's some factor you're leaving out in your description.