Starting out with a duplex in NJ

13 Replies

I recently found a duplex in a desirable area of Bergen County. Upstairs units is 1 bdrm/1 bath and the current tenant has been living there for 10+ years. The unit rents $1100 a month, which seems to be under the fair market value. The downstairs unit is a 2 bdrm/1 bath and rents for $1800 a month. The unit is also tenant occupied. I think the duplex is in a good area, easily accessible to trains, grocery stores, restaurants, etc. The seller is currently asking for ~$520k. I would appreciate any input regarding the price, things to consider when looking at a property, etc. My wife and I are currently looking for our first property!

If you buy it for $520k, you'll be losing money every month. Like a lot of money.

For those rents, I'd pay somewhere between the 1% and 2% rule, which for this house means I'd pay between $145k and $290k.

This is a really, seriously, resoundingly bad deal.

Go to a cheaper market, especially if you want cashflow. I can find 2% deals all day in my market (which is a 2 hour drive from Bergen County) and I'm sure you can find something closer to you that'll cashflow. 

I don't know NJ markets really, but feel free to send me a message if you'd consider a PA market. I'd be happy to talk with you.

@Milos Cejkov

I have to agree with @Clark Kirkpatrick. I’ve been looking for the right property here in Bergen. After 2 year I found it.

2 family

1/1 - rent for $1800

3/1 - live in paying $1500

.28 acres

$7100 property tax

$3100 flood insurance.

Purchase @ $414k

I will invest $12k for repairs. Most I will handle myself.

Thank you all for your input! I really appreciate it. Your replies are really helpful. I personally thought the property price is too high. I am new to BP and wanted to share my find with you.

@Clark Kirkpatrick thank you for your advice. I will definitely look into PA area. One problem that I noticed with the NJ market is that a larger number of duplexes are old (charging lower rent), but sellers want premium price. I think the seller has owned this particular property for a long time, so they were able to take an advantage of cash flow and now the appreciation when they sell the property.

Awful deal. What are the taxes? I'm assuming very high in Bergen county. Your rental income wouldn't come close to covering your mortgage payment and taxes even if you put 25% down. Then there's everything else you need to pay for, insurance, repairs, lawn care etc... 

It took me two years to find a duplex in Monmouth county where the numbers worked and I'm clearing a nice monthly profit after all expenses. Wanted to buy another one but got into bidding wars where it didn't make sense. Been looking ever since and there's been nothing.

Bottom line... Do The Math. If you're not comfortably clearing a monthly profit don't do it. Doing nothing is the right decision if the numbers don't work.

Things to account for when purchasing rental in terms of expenses

1. Mortgage

2. Interest

3. Property Taxes

4. Insurance

5. Water (Landlord usually covers water in NJ)

6. Vacancy 

7. Cap Ex

8. Repairs

9. Property Management 

If after accounting for those 9 things, you can still see some kind of cashflow then you might be on to something. If you want to filter some properties so you dont analyze each one, just use the 1% rule which basically says that if a property is purchased for 520K, you should be able to get 5,200 in rent. So being that rent right now for the property you mentioned is only 2900, this would be considered a bad deal as of now. @Milos Cejkov

Purchase price is too high for the rents in the area. this is more for someone who wants to live in and not thinking of the investing side.

@Milos Cejkov In order to answer wether or not this is a good deal I'd need some more information about the property like:

-What are the current comps on the property?

-What is market value for rent in the area?

-Location (not all areas in Bergen County are equally sought after)?

-Current taxes?

Reach out to me if you have any additional questions, Id be happy to assist.

@Malik Eleby Yes you are. You must know and abide by landlord-tenant laws, and your tenants must pay you rent. You have all the responsibilities and benefits of landlording, including the tax deductions, rental income, providing a safe and serviceable apartment, maintenance calls... all of it. It's just a bit easier since you're there all the time and you can keep an eye on things.

While I agree that the price is high, and that the rents are too low (Especially the one for $1,100) I do not think the "BP rules to investing" are always applicable for people who want to invest in hot markets like North Jersey. For example: you find me any deal in the 5 boroughs in NYC that you can make the 1 or 2% rule work on, i'll be waiting.... The folks from PA can easily achieve their desired percentage points because the purchase price is often very low - astoundingly lower than that of North NJ.

If what your looking for is a "by the books" cash flow investment, you may have to look elsewhere because you are not likely to find that in that area. I do however support investors who decide to go down that route if they are tied to the area and want to live there and collect supplemental income: there is no wrong in doing that.