Found a property but the numbers don't seem right

[Michael Abate]

Hello fellow investors, I'm hoping that you can help clarify if I'm getting something wrong with a deal that came my way. I was planning on buying a property in NJ and after all the numbers, there is still a negative cash flow. But the property is still getting offers that are higher than mine. Some advice would be really helpful here and time is short here since they may accept the other offers before mine. The details are as follows:

• Current Price: $370,000
• My offer: $320,000
• Condition: House is in rent ready condition but I have added $5000 for touch ups here and there
• 2 Family House with each unit renting for about $1300
• Insurance/yr: $700
• Taxes: $11,500/yr
• Loan: FHA with 3.5% downpayment (30yrs)

Here is a link to the analysis that I did as well in case that helps, this is analyzed with both units rented out to know whether the investment is sound, even though one will be my primary residence:
https://www.biggerpockets.com/calculators/shared/2...

Please let me know if I am missing something or if these other investors are offering too much. Thanks again and I look forward to hearing from you. 

Regards,

Michael

[Amit Patel]

@Michael Abate

Michael - In many areas of Jersey, the 1-2 Families will NOT cash-flow positive. The basic math just doesn't work because of a few high costs that can't be absorbed by renting out 2 units.

1. Taxes (My per unit taxes on a 4 family are 3K a unit while on my 8 family, they are 2K a unit)

2. Water is high , regardless of units in NJ

3. Maint/management costs ( 6% on bigger properties where as 2-3 units they want 10%)

Many people are buying and living in one since its lower than renting and you are building equity. Also, people are buying for appreciation. Right now, due to the higher values, people are holding out and not enough inventory in many areas as well like Jersey City so this is driving up prices. My advice is to keep looking and make sure the numbers work for you if this one doesn't work. Personally, I'd suggest you look at 4-family if its in your price range as that will give you the sweet spot where you can start seeing a decent return.