On July 1, 1997, about 1940 eastern daylight time, a Beech C24R, N5156M, was substantially damaged when it landed off the runway's right side and collided with a drainage ditch, at the Old Bridge Airport (3N6), Old Bridge, New Jersey. The certificated flight instructor (CFI) and private pilot were not injured. Visual meteorological conditions prevailed for the flight that departed the Allaire Airport, Belmar, New Jersey. No flight plan was filed for the instructional flight conducted under 14 CFR Part 91. The CFI reported that the flight arrived at 3N6, with the intent to practice simulated engine failures to Runway 6. The first simulated engine failure was conducted to a landing, and the second was terminated with a go-around. During the third simulated engine failure, and while on final approach, the instructor observed that the airplane was low, and verbally instructed the student to add power. The student added full power; however, the engine did not respond. The airplane then touched down on the grass, to the right of the runway, and encountered a drainage ditch. Examination of the engine by a Federal Aviation Administration (FAA) Inspector did not reveal evidence of pre impact malfunctions.