First Deal Analysis in Jersey

17 Replies

Hello BP - looking for assistance in analyzing my first deal. I just put it through the rental calculator and BRRRR calculator and it does not look promising from a Cash on Cash return perspective. I'm wondering if SFR in my area based on taxes etc are just out of reach or if I am being too conservative in my numbers.

Currently approved for a Fannie May loan which buddles renovation into the purchase price.

3BR / 1BA SFR

List - $111k

ARV - $150k

Assumed purchase price - $80k

Reno - $17k-$20k

$14.5k down

$4.5k taxes

$55PMI

$6k closing

5% interest, 30 years, 1.2 points

$1,400/mon conservative rent projection.  Would likely start at $1,600 but comfortable I could get $1,400.

Lender quote of expenses at $80k purchase price is $975-$1,000 month.  When I account for vacancy, repairs, capex and prop management it pushes me into a flat or negative cash flow projection plus alot of upfront cash.  Am I right to walk away or am I just too conservative on this one and hoping to land the perfect deal....

Thank you all

Howdy @Wesley Clark

This is very simple to determine based on the numbers you provide.

Income $1,400

Expenses $700 (50% rule). Since you did not provide much here.

P&I $975

Cash Flow. - $275

Why would you want a rental property that you lose $275 every month?

Run....... don’t walk away from this deal.

Run away. I’m an investor is south Jersey and can help you find a much better deal than that

Mayer M. please send me an email to discuss further if you may, it is on my profile.

Thanks!

@Wesley Clark - I agree with @Mayer M. and @John Leavelle . Please do not buy this property. Finding cashflowing properties in South Jersey that are not multi family, or are not in Camden/Gloucester City/Lindenwold/Woodbury etc. is EXTREMELY challenging if not darn near impossible. People seem to find a way to do it sometime, I'm not sure how as it seems like way more work than I'd want to put in for a few bucks. 

I agree with much of what is being said here. This place does not look like a good move. However, finding an investment property in the Gloucester County NJ area is certainly possible. If you are in the area let’s meet up. I’ll show you some that are currently being worked on as well as some that have already closed and are advertised/rented. On a side note, I have seen plenty of people trying to wholesale places around here and they do not know what they are doing - and sometimes those are the homes that get posted as “deals”. You have to know your area or at least know someone that does. I’m sure that’s a no brainer and doesn’t need to be said. :) 

Tell me what you guys think about this investment:

Purchase price $105k

Taxes $2200 annually
Condo fee $2400 annually
Insurance $500 annually
Water/sewer $1200 annually

Gross rent $15k annually - above expenses = net rent income $8700 annually

Originally posted by @Mayer M. :

Tell me what you guys think about this investment:

Purchase price $105k

Taxes $2200 annually
Condo fee $2400 annually
Insurance $500 annually
Water/sewer $1200 annually

Gross rent $15k annually - above expenses = net rent income $8700 annually

You're missing expenses for vacancies, property management, repairs/maintenance, and CapEx. I usually ballpark these at around 33% of gross rents.

That would bring your net rent down to $3750

If you're putting debt on this than I'm going to assume you're making 20% down then you'll be financing $84,000. At a rate of 4.5% for 30 years then you'll be making debt payments of $5,100. This means that you will be at cash flow of negative $1,350. Definitely not a good investment. 

If you're paying all cash than yes...it will cashflow and the return will be 17.8%...you could definitely do much worse, but I think you could do better as well. 

James,

How did you get that return if paying cash total of 17.8%?

Originally posted by @Mayer M. :

James,

How did you get that return if paying cash total of 17.8%?

 Haha...you're right...it's a 3.6% return...was crunching too many numbers... and not paying attention :-)

Lol. Thanks needed to proof a point to a friend

Buy Multi Family in south jersey 

I’ve bought a bunch of condos in south Jersey that were good investments. I look for multi family but can’t seem to find any deals

Ok so here is another deal.

Multi family 2 - 2bd/1.5 bath. Currently owner occupied with other unit rented at 1.1k/mon. Assumption being as they are mirrored units the current owner occupied portion could rent for the same. Units are in great condition.

139k List price
15% Down
5k Closing
5% Interest
4.5k taxes
$2.2k/mon rents

BP calculators say $386/mon cash flow and 18% CoC return. ($1.8k/mon for total expenses)

Here is the rub...the full basement is in the basement...and the basement is only 5ft tall - no joke. Also the half bath is literally just a toilet in the corner of the larger bedroom upstairs....who built this place?!?

On paper it seems to be a great deal but it seems like interest for renters maybe low or that it would experience high turnover rates. Seller is motivated to sell and could likely get for even less. If it passes a CO is it accurate to assume that someone will always want to rent?

Originally posted by @Chris Connery :

Buy Multi Family in south jersey 

 Hey Chris,

I have trouble finding multi-family deals in decent areas of South Jersey. Any tips?

Originally posted by @Wesley Clark :

Ok so here is another deal.

Multi family 2 - 2bd/1.5 bath. Currently owner occupied with other unit rented at 1.1k/mon. Assumption being as they are mirrored units the current owner occupied portion could rent for the same. Units are in great condition.

139k List price
15% Down
5k Closing
5% Interest
4.5k taxes
$2.2k/mon rents

BP calculators say $386/mon cash flow and 18% CoC return. ($1.8k/mon for total expenses)

Here is the rub...the full basement is in the basement...and the basement is only 5ft tall - no joke. Also the half bath is literally just a toilet in the corner of the larger bedroom upstairs....who built this place?!?

On paper it seems to be a great deal but it seems like interest for renters maybe low or that it would experience high turnover rates. Seller is motivated to sell and could likely get for even less. If it passes a CO is it accurate to assume that someone will always want to rent?

 Sounds like a headache/money pit

Originally posted by @Wesley Clark :

Ok so here is another deal.

Multi family 2 - 2bd/1.5 bath. Currently owner occupied with other unit rented at 1.1k/mon. Assumption being as they are mirrored units the current owner occupied portion could rent for the same. Units are in great condition.

139k List price
15% Down
5k Closing
5% Interest
4.5k taxes
$2.2k/mon rents

BP calculators say $386/mon cash flow and 18% CoC return. ($1.8k/mon for total expenses)

Here is the rub...the full basement is in the basement...and the basement is only 5ft tall - no joke. Also the half bath is literally just a toilet in the corner of the larger bedroom upstairs....who built this place?!?

On paper it seems to be a great deal but it seems like interest for renters maybe low or that it would experience high turnover rates. Seller is motivated to sell and could likely get for even less. If it passes a CO is it accurate to assume that someone will always want to rent?

 The more odd the property is the harder it's going to be to rent out. There will likely always be someone wanting to rent a space at a specific price (maybe it's not $1100, maybe it's only $700) 

Something else to consider is that when you go to the bank to purchase this property (or another one like it) if you don't have experience as a landlord they may not allow you to count projected rents in the purchase, which means the deal would have to work at $1100 a month not $2200. Then again...call around to 30-40 lenders and you might find someone willing to do this (or talk to an asset lender rather than a bank) 

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