[CALC] $80k on $1.3M cash deal for 4 family Jersey city
In my local area (Jersey City, NJ), 5% caps have been the norm.
I'm eyeing a 6% cap paying full cash. Historically, I would finance as much as possible, but obviously 6% cap in an 8% borrowing environment is nonsensical.
$1.3M purchase price
$9100 gross rent
- taxes $17K
- water $2500
- insurance $3000
- 2% historical vacancy
- $6000/yr repair/capex
- In this area, tenants pay for broker fees.
- NYC views, rents are slightly under market. Each unit is very large for the area.
- I currently manage my own property (mostly passive - snow, drain clogs)
Unit B. - $1000 (1bed/1bath) Possibly $1500 after $10k reno
Unit 1 - $3000 (4bed/2bath,1500sqft) Possibly $3500 after $30k reno
Unit 2 - $2800 (4 bed 2bath,1500sqft) Possibly $3500 after $30k reno
Unit 3 - $2100 (3 bed 1 bath,1200sqft) Possibly $2500 after $20k reno
$150 parking + some coin laundry revenue
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Net $80k/yr with decent upside post renovation.
6% cap as-is
7% cap upside.
Curious what you guys think. This is my 2nd multifamily near NYC/NJ. I have owned the first one since 2016 and it has been relatively stress free and passive income.
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#5 Multi-Family and Apartment Investing Contributor
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It has a lot to do with your exit strategy. If you plan to hold for a short period probably not good. I had California properties that rarely cash flowed but I held them for 30 years and when I sold them BaBang! Cash flow will cover the bills, appreciation can make you wealthy!
Why is ”6% cap in an 8% borrowing environment is nonsensical”?
Quote from @Bjorn Ahlblad:
It has a lot to do with your exit strategy. If you plan to hold for a short period probably not good. I had California properties that rarely cash flowed but I held them for 30 years and when I sold them BaBang! Cash flow will cover the bills, appreciation can make you wealthy!
I plan to 20 year hold minimum. 6% is the best i can find. I do wonder if caps will surge soon due to a pending crash
@John Kim "I do wonder if caps will surge soon due to a pending crash" - I wouldn't bank on that statement. Just my 2 cents.
Seems like a solid deal
Everything looks good, but I would be nervous underwriting 2% vacancy. Does this consider turn/make ready time? It doesn't leave any margin.
Quote from @Khari F.:
Why is ”6% cap in an 8% borrowing environment is nonsensical”?
Looks like the deal would be losing money.