Duplex in Bergen County - should I buy?

Question

Hi all,

Not new to investing but by no means an expert. I've gotten very lucky (#blessed) in the past where I have been able to buy cash flow investment properties.. I would love your opinion here. The property we are interested in is a duplex listed for ~750K, in an area that's high tax, but good school system and close to train station. Right now we're not looking to move, so our thought to purchase and fully rent out until we are ready to move-in. The reason we are buying now is b/c its rare to find duplex/multifmailies in that area. So here's how the numbers play out:

Listing price $775K

2 unit/duplex. Each can be rented out for $2500-2700

close to train station

Taxes: $18,00 :( :(

Our plan is 20-25% down, and after everything we're pretty much net zero. BUT, this is an expensive town so in the long run, to be able to live on one side and have some rental income helps with the property tax. For just purely investment purposes, I'm sure this is not a great deal. My mult-family investment in JC Heights gives me the same cash return, but at only about 1/2 the cost, so I know from personal experience.

What would you do?

Darren Sager · Answer

@Kibby Twong rents seem low on the price of that home.  Unless it has a prior owner who didn't make updates and you're looking at a lot of CAPEX as soon as you purchase.  In that price range you should be north of $3K in rents here in NJ, depending on how close to train.  But if you're saying it's in a good town with good schools, something's amiss here.   Just saying from my experience in the be near train stations in NJ for more than 20 years.

Joe P. · Answer

To give you a comparison, I bought a duplex in Gloucester City for just north of 100k, and both are 2 bedroom units bringing a total of $1900 per month.

Which property has more of a chance to go up? Which property cash flows? Which property can provide appreciation benefits?

Just because a chocolate bar is out there, doesn't mean it needs to be eaten, nor is it potentially good for your health. In this case, I don't see the value add, I don't see the immediate cash value, and you're going to take 150k of your own cash and lock it up into a property where your net return could take decades.

Michael Lee · Answer

Hi Kibby,

Seems like you are looking to purchase this for the appreciation? As you mentioned, it's not a solid cash flow property. Are you buying this property under market value? Is this property a value add? (Will you be doing work to increase value?) If so, what is the ARV?

Of course, everyone's strategy is different, but personally I would not consider buying anything strictly for appreciation. I would only buy if it is value add / good cash flow.

Just because multifamiles are rare, doesn't make it a good deal for investors!

Kibby Twong · Answer

Update: bidding war going on already. Not going to participate. Thanks for all your inputs.

Yavuz Bayram · Answer

I dont think tying up that much cash into a property without positive cash flow would make sense. Appreciation can go so much you will also have costs of maintenance, vacancy, and other unexpected issues from time to time and it may become frustrating over time especially if you are not making a profit. When you decide to sell there arises another issue which is prepping the house for sale, realtor fees, transfer tax etc etc. Will the house appreciate enough to cover these costs and your time and effort?

Joe P. · Answer

Hi @Kibby Twong, I am managing the property myself; I'd like to switch it to a PM soon but I've had some unexpected costs I want to get contained in the fiscal year before doing so. I'm like you -- busy guy with a full-time job, but I'm making time accordingly. That'll end probably as soon as I get another deal under my belt.

Feel free to reach out at any time -- I think I found a good deal (albeit with some flies, nothing is perfect) and I'm sure there are more out there. Need to look real hard since the MLS inventory is low.

Kibby Twong · Answer

@Darren Sager - one unit is 3br/1.5 bath and another is 2br/1.5 bath - you're thinking over 3K each? or total? Realtor i'm working with said easy to rent out at 2500-2700 each unit.

David Smith · Answer

If you have nothing better to invest and it is a newer building, why not ?

It is in tenafly ?    Why tax is so high?

Many nice  2- family sell for over $1M there.

Kibby Twong · Answer

I think the appeal is the location and this property somewhat checks off most of everything we're looking for when we plan to move from NYC to the suburbs in a few years (ie., decent commute, good school system). Purely for investment it's not that great of a deal, but I wonder if it's still a bad deal if we plan to moving there in the future and having that extra income helps to offset the high property tax.

@Joe

@Joe P. - Do you manage the property yourself or have a property manager? Gloucester City is a bit too far for me to self-manage, esp with young kids and full-time job. I love to hear more and connect to talk about investment opportunities there? It'll be a dream to buy a duplex for $100K with rental income of $1900!!

Raul Leckie · Answer

Hi Kibby,

Perhaps STR (short term rental) will make the numbers work. If it is near the train it might work well for you.  Keep in mind the additional cost of furnishing. I personally want the property to work for LTR also in case I need to switch it back.

Duplex in Bergen County - should I buy?

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