Going to see a 2 family

Going to see a 2 family house this weekend. The numbers seem to work. It’s listed at $225k but I would offer around $200k. Monthly P&I should come out to less than $1000/mth. Taxes are $2200/yr so say another $200/mth. Not sure what insurance would cost, maybe another $100/mth? total= $1300. Both units are rented right now and generate $900/unit and they pay own Utilities. $1800-$1300= $500/mth.

Not sure if there is a general rule of thumb when renting but I could use an extra $500 cash flow a month. Should I consider this deal. And when I go to look at the house should I request a copy of the lease from the owner?



Here’s how your deal will really look:

Income: $1,800

PI ($200K @ 7% for 30 years): $1330
Taxes: $183.33
Insurance: $100
Maintenance/Reserves: $100
Management (7%): $126
Vacancy (5%): $90

Total Outgo: $1929.33

Cashflow = (-129.33)

Even though you plan to manage yourself, you need to include the costs. You also need to include maintenance and reserves (I used $50 per month per unit)…in addition you need to include a vacancy rate. I used 5% because you’re going to have SOME vacancy between tenants. I also used a 7% mortgage …if you can get it!

This property is an alligator. It will lose over $1500 a year. I think this is fairly eralistic based on the information you provided.


Oh wow…thanks for the reply. Rookie mistake I guess.

Hmmm, maybe that’s why this guy is selling…lol

Thanks again

Formula noted :slight_smile:

He’s probably not into the cost for $200K…I think that you could make this work with creative owner financing or a couple of rent increases…

In my opinion, it’s worth more on the line of $175-180K max, not $200K and CERTAINLY NOT $225K.

The ‘formula’ is not difficult, more commonsense and knowing what ALL of the expenses will be. Unfortunately someone will probably buy it!



I have this great rental in Daytona! Only -400.00 a month!!! I’m going to make out like a bandit.


Light Being I have an excel spread sheet that can help you with income and expense. If you want to know what kind of numbers to plug in for maint. and repair reserves. I’m sure folks will give you their advice.

LOL…sorry, Like I said, rookie mistake. I totally overlooked all the other factors associated with being a Landlord. Never committed to renting, just toying with the idea right now. But I guess I have some homework to do.

Please email me with the excel SS when you get a chance. Thanks


This rookie would love a copy of the spreadsheet!
;D ;D

Would have saved myself a lot of time if I knew one was already on the website!! :o


Hey Guys…

Well, I’ve been looking for Multi Family houses in desireable and middle class areas in NJ but they all seem to either break even or loose money.

So I’ve been checking out Low income areas. There are 3 major cities here in NJ they I’ve been looking into: Newark, Jersey city and Trenton.

Looking into a 4 Family at $190k

Check my math. This is pretty much what those cities have to offer:

Income: $2,600

PI ($190K @ 7% for 30 years): $1264
Taxes: $250
Insurance: $100
Maintenance/Reserves: $100
Management (7%): $182
Vacancy (5%): $130

Total Outgo: $2026

Cashflow = (+574)

I’ve also found 2 Families under 100k with the same type of cashflow per month. What do you think? Is $500-$600/mth a good first deal?


going into low income housing, your looking at more deadbeat tennants, tennants that destroy the place, and will probably have higher maintanence costs. plus who knows if or when you will get paid.

It seems that most rental properties that i come by will not make money unless you have money to put down. SFH in my area will only rent out at $550-$600 per month, and it is hard to find one under 50,000. A 4-plex will run $200,000 rented out at $650 per month. After you figure costs in, you are making a little bit of money at best. But if you look hard enough you will find deals.

Of the three, I would recommend Newark. Then, while you are getting screwed out of your rent, you can have your car stolen, too!


lol, very funny.

Seriously, the numbers don’t seem to work at all if you look in middle class areas. Most of them, the numbers aren’t even close.

In todays market it seems like the only places getting any kind of return are city areas in NJ.

In my town I saw a 2 family house going for 369k, and the rent for each unit was $1200. That won’t even cover the mortgage. That’s the kind of numbers I’m getting, that don’t make sense for anyone to buy.

I’ll keep looking but the middle class market is get discouraging.

I’ve got two words for you: BLUE STATE


Yes, and that is why its hard to get into the rentals. You may try doing spec houses in new subdivisions in your area. I am looking into them and i can do one for about 125k (even less if i do some of the work myself) in my area and sell for $190-200k for aprox. $50-$60k profit after fees and commisions. I just need to get the ball rollin here.

There are three ways to make money in rentals.

  1. Rental income
  2. Property appreciation.
  3. Principal reduction.

In most “middle class” areas you are doing good to get positive cash flow. Why? Because the property will more than likely appreciate at a steady rate and your tenants are more likely to pay rent.

In most “lower class” areas you are crazy to buy a property that does not have potential income of ATLEAST 2 times your PITI. Why? Because the property will more than likely not appreciate at the same rate the “middle class” areas are and your tenants are more likely to not pay rent.

The Ghetto can be good if you have many units so that you can play the numbers.

Disclaimer: The following message is being typed by my alter ego and thereby Patrick Lawson is not responsible for comments made by alter ego.

If you have section 8 Tenants you have some guarantee of incoming rents, but no guarantee that the tenants will not trash your property, pay utilities, etc. These tenants also tend to know how to “work the system” and evicting them can be a nightmare.

Option two, don’t accept section 8, don’t give tenants a copy of the lease. Give them 45 - 60 days to show you what they are made of. If they don’t pay rent or damage the property have a local on your payroll who “specializes in evictions”. Buy this local a 16 pound sledge hammer. Pay them $50 - $100 per eviction. This option saves time and money. I’ve seen it work quite well for some investors.

Note: If you are going to be managing the properties yourself you will want to purchase a firearm.

Unless you can buy a multi-unit commercial building I would stay away from the “low class” areas.

Just my $0.02

What? you mean Blue as opposed to Red?


Have you ever been to “Joisey”? The state motto is “Are you talkin’ a me? I know your’re not talkin’ a me that way”! And, there’s a lot of “crooked noses” if you get my drift.

It’s very difficult to get a permit for a firearm in NJ, but that said there’s a very high likelihood that he already has one…


Tell the police where you intend to landlord and I’m sure the firearm permit will be no problem. :wink:

LOL…Jersey isn’t that bad man. Sure they have specific areas where you shoudn’t wonder to after a certain time but overall it has more middle class suburban areas then anything. Some rural areas down south too. It’s really around the city areas you see the crime and the low class just like any other state.

Hey Keith,

Touche!! I got it and I’m lovin’ it. Good reply. Thanks for making my day.