Gloucester City - Are my numbers too optimistic for the area?

10 Replies

@David King , this looks interesting. Is it SFR or MFR? I have questions/thoughts about some of your numbers:

  • Your vacancy is very high. I usually figure 8%. Is 13% normal in this market?
  • Your CapEx and repairs are very low. I use 15% combined. You may want to even bump that up since this is such an inexpensive property.
  • You should expect your property taxes to go up after the renovation.
  • Management will probably be 10-12%
  • Why a 20-year mortgage? If this is a commercial note, I don't think you'll get a rate that low.
  • Expect 6 months to refinance, that's the typical seasoning period.

Assuming your other numbers are accurate, I think you'll end up cash flowing ~$250/month, which is pretty good. You'll leave a few grand in the deal, but have great ROI.

Thanks for checking it out Jaysen, I am going to rerun using your input- 

-The PM I use in VA charges a month and half rent to place a tenant, 12.5% equals to that for the calculator.

-Capex is low, I agree. I expect to replace the roof and HVAC going in.

-A PM I know there says his going rate is 8 plus the 1.5x rent to place a tenant.

-This plan is for a commercial refi. I spoke to a nice gentleman at Haddon Savings and he quoted me that.   

@David King , a month and a half lease-up charge? Ouch! Regardless, assuming you have unit turn every 2 years, that works out to 10.4% vacancy. I guess the slightly lower monthly charge helps, though. May be worth talking through a fee schedule that better aligns your interests. Under that schedule he makes more money turning over tenants than keeping them in place and happy. This is the exact opposite of what you want as an owner.

@Jaysen Medhurst I will take that on for action, thanks ofr pointing that out. I never looked at the numbers in a way that increases their pay for leasing to less than stellar tenants. 

I planned on offering prosepective residents options like Starbucks for the leases- 36 mos/$1275, 24 mos/$1325, 12mos/$1375. My thinking is prospective residents would take the cheaper over the shorter. 

That could 1-spread out turnovers unless evicted or 2- increase our cashflow for the shorter term. I think I heard that here somewhere.  

@David King I think @Jaysen Medhurst provided great advice about the specific deal/property above. On a more macro level, I think Gloucester City, NJ is interesting. I really like that the income and house values have shown strong growth and that the crime rate has been declining, but what concerns me is the declining population. It may not make or break the deal, but it may be something to look into!

Robert Leonard

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