How to find the best room mate friendly market?

Question

Hey Guys!

I’m currently working towards that first Rental property in NJ, ideally I would love to have a multi family but given the fact that I’m the only person that would be putting up the DP and I make around $50,000 a year, I doubt that I’ll be able to qualify for one.

I figure I’ll do a single family through FHA and rent the rooms for about a year and then potentially rent to one family.

But how do I really find out what is the best market for room rentals?

Any and all advice will be appreciated.

Thanks!

Ivan Maldonado · Answer

Hey Joseph! Thanks for the response. Sorry for this super late response. I was hit by covid pretty hard. Awesome, would you happen to own any multifamily units?

Peter Vander Valk · Answer

Hey @Ivan Maldonado, what @Joseph Guzzardi Jr is saying is correct, you can utilize 75% of the appraised rental income to qualify with 2-4 family. That being said, your debts are another factor in what you can qualify for.

As far as room rentals in a single family, I have known people who are successful around colleges. However, you can't use this income to qualify (this would be treated as boarder income which you would need to show on your tax returns for 2 years to qualify). So long story short, you will likely have more buying power with multifamily.

If you can get a cosigner, that's another option to increase your buying power, but you need 15% down FHA with a non-occupant co-borrower for multifamily.

Joseph Guzzardi Jr · Answer

@Ivan Maldonado Welcome to BP Ivan. There's a good chance you would actually qualify for a higher amount with a Multifamily because the rental income gets taken into account. I am not a lender but I work with people in the 2-4 unit space all the time.

Peter Vander Valk · Answer

@Ivan Maldonado sorry to hear about that, and no worries. Hope you're feeling better.

Sure, feel free to shoot me a message anytime with any questions!

Ivan Maldonado · Answer

Hey Peter,

Thanks for the great insight, sorry for the late response as I was hit by covid pretty bad. Buy this has definitely opened my eyes. Would you mind if I messaged you with a few follow up questions?

Drew Sygit · Answer

$50k income => $4167/month

At 40% DTI => 1,667 PITI you'd qualify for less debt payments

Assuming 25% of that is for tax & insurance and a 3.5% interest rate => $278k mortgage amount

You can't find anything in that price range?

Regarding finding "good" roommate areas - go where the roommates would post or look for homes to rent! That's where you'll need to advertise anyways. If you can't find any ads then it's probably not a good area for roommates.

How to find the best room mate friendly market?

How to find the best room mate friendly market?

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