Owning rentals/ house hacking for single families?

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Owning rentals/ house hacking for single families?

Brandon MorganPro Member
Member since 2023 · 124 posts · 132 votes

Hi all, I am in new jersey and I am new to Real estate. my plan is to own rental properties and also house hack. my original plan was to find a duplex but the low inventory and competitive market has been making this really difficult. are buying single families also a good option for this? I already got preapproved for a loan and have 30k ready for disposal.  I know for single families I can rent out by the room. but is the process for that complicated? are there legal issues? open to any suggestions for owning and renting out single families. if anyone has any experience in this matter I am more than ready to listen. 

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Alexa Ferguson
Real Estate Agent · Denver, CO · Member since 2021 · 40 posts · 101 votes
3y

Hi Brandon! I have lived in 3 houses over the past few years and house hacked all of them - all single family homes. As you said, reasonably priced multifamily properties are hard to come by in many markets (I am in Denver and that is the case here), so SFH is the more affordable option. By making it your primary residence you can also put as little as 0%-5% down, depending on the lending program. We would look for homes with a space that could be separated so we didn't have to share space with our tenants. This could be a basement, upper level, wing of the house, apartment over the garage, etc. - any part that can be accessed separately. Denver homes commonly have a separate entrance to the basement, so that is the form ours took. You can then rent this space out as a long-, medium, or short-term rental, based on the strategy you like. We do STRs because they generate the most cash flow and are allowed in our area. We have consistently covered our mortgage for the past 3 years using this strategy! Hope that helps!

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  • Taylor DaschBusiness Member
    Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
    3y

    Depending on the demand for STR/MTR in the market, you could try one of those and rent the room out. If it were me, I'd be patient and see if I could get a MFH but I have been in your shoes in the past and ended up just getting a SFH.

    [email protected]254-718-4249
    Taylor Dasch | EG Realty560 Reviews
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  • Jimmy Bostic
    Investor · Columbus, OH · Member since 2023 · 73 posts · 82 votes
    3y

    @Brandon Morgan I agree with Taylor, I'd probably wait for a MFH. You could connect with a brokerage or try to find deals (on and off-market) yourself. But I think SFH is a good entry point for REI. Tradeoffs are less privacy and lower returns but it's still a good option.

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  • Vanessa Ivonne Hernandez
    Lender · Jersey City, NJ · Member since 2020 · 101 posts · 43 votes
    3y

    Purchasing a distressed property and putting in work to force appreciation tends to work in New Jersey whether you want to go the single family or multifamily route. Connecting with investor-friendly agents helps too so they can do things such as helping you identify hidden value. I know first hand how expensive NJ can be so depending on what your financing goals are, you also have the option to put 0% down on a 1 or 2 unit property so you can step into equity on day 1. There's ways to get creative with it. My best recommendation, if you haven't already, is to interview realtors and lenders who can help you scale your portfolio in the way it makes sense for you. Good luck!

    1Reply
  • Alexa Ferguson
    Real Estate Agent · Denver, CO · Member since 2021 · 40 posts · 101 votes
    3y

    Hi Brandon! I have lived in 3 houses over the past few years and house hacked all of them - all single family homes. As you said, reasonably priced multifamily properties are hard to come by in many markets (I am in Denver and that is the case here), so SFH is the more affordable option. By making it your primary residence you can also put as little as 0%-5% down, depending on the lending program. We would look for homes with a space that could be separated so we didn't have to share space with our tenants. This could be a basement, upper level, wing of the house, apartment over the garage, etc. - any part that can be accessed separately. Denver homes commonly have a separate entrance to the basement, so that is the form ours took. You can then rent this space out as a long-, medium, or short-term rental, based on the strategy you like. We do STRs because they generate the most cash flow and are allowed in our area. We have consistently covered our mortgage for the past 3 years using this strategy! Hope that helps!

    2Reply
  • Brandon MorganPro Member
    OP
    Member since 2023 · 124 posts · 132 votes
    3y
    Quote from @Alexa Ferguson:

    Hi Brandon! I have lived in 3 houses over the past few years and house hacked all of them - all single family homes. As you said, reasonably priced multifamily properties are hard to come by in many markets (I am in Denver and that is the case here), so SFH is the more affordable option. By making it your primary residence you can also put as little as 0%-5% down, depending on the lending program. We would look for homes with a space that could be separated so we didn't have to share space with our tenants. This could be a basement, upper level, wing of the house, apartment over the garage, etc. - any part that can be accessed separately. Denver homes commonly have a separate entrance to the basement, so that is the form ours took. You can then rent this space out as a long-, medium, or short-term rental, based on the strategy you like. We do STRs because they generate the most cash flow and are allowed in our area. We have consistently covered our mortgage for the past 3 years using this strategy! Hope that helps!


     wow that's very useful to know. thank you. 

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    3y

    hi @Brandon Morgan house hacking single family or duplex works in NJ.  Rent by room tends to work when owner occupying however it becomes more difficult once you leave property.   There are legal issues involved for sure most of which are intended to prevent  boarding houses. How wide of an area are you open to, what parts of NJ?

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  • Julien J.
    Investor · CO · Member since 2016 · 757 posts · 1k+ votes
    3y

    I would also agree. A multi would best.

    What strategy are you looking to execute long term? 

    A lot of my client's initial goal is to cash flow net zero in a duplex while living in one of the units. I'm in Seattle where is market is expensing and competition fierce. What I have seen work instead is jumping into a multi that needs work with negative cash flow, creating value and raising rents.

    Although the cash flow is negative in the short term, it much better then paying full rent. Over time, 3-5yrs typically, the cash flow improves to positive, and the equity appreciates significantly.

    1Reply
  • Brandon MorganPro Member
    OP
    Member since 2023 · 124 posts · 132 votes
    3y
    Quote from @Julien J.:

    I would also agree. A multi would best.

    What strategy are you looking to execute long term? 

    A lot of my client's initial goal is to cash flow net zero in a duplex while living in one of the units. I'm in Seattle where is market is expensing and competition fierce. What I have seen work instead is jumping into a multi that needs work with negative cash flow, creating value and raising rents.

    Although the cash flow is negative in the short term, it much better then paying full rent. Over time, 3-5yrs typically, the cash flow improves to positive, and the equity appreciates significantly.


     my long-term plan is to rent out multiple properties and receive the cash flow. i want to start with house hacking to make it easier in the beginning. 

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  • Brandon MorganPro Member
    OP
    Member since 2023 · 124 posts · 132 votes
    3y
    Quote from @Julien J.:

    I would also agree. A multi would best.

    What strategy are you looking to execute long term? 

    A lot of my client's initial goal is to cash flow net zero in a duplex while living in one of the units. I'm in Seattle where is market is expensing and competition fierce. What I have seen work instead is jumping into a multi that needs work with negative cash flow, creating value and raising rents.

    Although the cash flow is negative in the short term, it much better then paying full rent. Over time, 3-5yrs typically, the cash flow improves to positive, and the equity appreciates significantly.

    I know my strategy for the next few years is to live in the property the first year and then move out and rent it out and do the same with the next property. I am currently approved for an FHA loan. 
    0Reply
  • Blake Novotney
    Real Estate Agent · Wilmington, NC · Member since 2021 · 166 posts · 116 votes
    3y

    Look for something with an existing ADU or a single family with a detached workshop/garage already on a slab if possible that you could spend that money on turning it into an apartment! It depends how common that is in your area, but it's possible.

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