This looks good to me, but does anyone see any problems?

Question

Good afternoon everyone,

I received an e-mail from a wholesaler in NJ who has a property under contract in East Orange, NJ 07018.  Here are the details:

Duplex multifamily property 2/1 downstairs, 3/1 upstairs.

Currently rented for $1050 down and $1350 up for a total of $2400

Taxes are $8,300

Tenants pay their own utilities (separate meters).

Upstairs is a Section 8 tenant who just got their lease renewed on 7/1.  Their contribution is $116 per month, and they pay their part every month on time.

Updates were done in 2013 including new roof, new kitchens and new laminate flooring.

The wholesaler is asking $107,500.  Tax assessed value is $168,200.  Similar properties are listed at $150,000+.

I was thinking of ordering a quick BPO to get a better idea from a local agent, but I feel it would easily sell for $140,000.

It looks like I would have two good strategies with this one; 1) Purchase all cash, then sell it normally for a small profit, or 2) purchase, and refinance and keep renting it out for rental income.

Anyone have some suggestions or thoughts?

I don't have the full cash purchase price on hand, so I'm also wondering if this would make a good partnership opportunity.

Thanks all!

Nick C. · Answer

I would look at what properties are selling for, as opposed to what they are listed for and their tax assessed value.

Bellerose is a long drive from NJ, hopefully you have someone who can get eyes on the inside and get some pictures for you? Even if you have to pay an agent or property manager it'd be worth it. The rents are tempting, and even if the tenants are paying there could be decades of deferred maintenance in there.

Steve Smith · Answer

@Joshua Nudell

I would try Asking  if the present owner would consider owner financing that way she continues receiving Monthly payments . And NOT to cheat the wholesaler out of his fee  I would pay him what he would get if it was sold on the market

Logan Hassinger · Answer

@Joshua Nudell

With only going on the information provided, 54k/unit with those rents should give you a good cushion after setting aside reserves for current and future expenses if your plan is to hold long term.

Are taxes really 8,300 on a property assessed at 170k?

One thing to consider is to use leverage on this purchase. 25% down will leave you with a payment of around 475/month providing a return above 30% compared to all cash and 12% return.  Leverage could allow you to do this 3 additional times.

This is all strictly numbers based, I have no idea about your market or any other intricies of the area.

Joshua Nudell · Answer

The owner is an older woman who has been landlording from afar (PA), and is now moving down south and wants to stop landlording.  She wants to move as soon as possible, and needs the cash to pay some back taxes ($20k+) and buy a house down south.   That's the story I got from the wholesaler.

No work is really needed, maybe painting inside.  The Section 8 unit just got a new lease, so that means that it passed its annual inspection?

Austin Youmans · Answer

It looks like a good deal but my question is if other properties are selling for 150k then why are they selling for cheaper. They might just need out to liquidate there money but it is worth finding out. Or does the property need work?

This looks good to me, but does anyone see any problems?

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