Move forward on multi-family in Northern NJ?

[Laura Levine]

Hi everyone.

I'm considering making an offer on a house that needs an addition built on it... Since this would be my first major construction project, I'm looking for some feedback about whether this has potential to be a good deal, and to see if people think I would be getting in over my head. Here is the basic information I have so far.

The house is a 2 bedroom 2 bathroom with two units listed at 299,000 in Northern NJ within walking distance to NJ transit train. We would be living in the primary residence and would want to add at least a bedroom and bathroom. The basement has potential to be finished as a smaller rec room and the attic is big enough to be either a rec room or bedrooms depending on codes. We had a contractor come look at it yesterday and they suggested the addition would be about $75k, putting us all in with the house at $375,000. We plan to live in the bottom unit for at least a few years, but we could rent it out for $1800. The one bedroom is going to 1000/m right now, but could probably get $1300 after we update it. This would be a buy and hold deal that we would rent out after we move out. We would probably put down 5% and roll a construction loan into the mortgage so we would have cash on hand in case of overages, emergencies, ect.

So what do you think... Potential for a deal, or too much for a newbie REI investor? Thanks in advance for any feedback/thoughts/suggestions!