Owning rentals/ house hacking for single families?

Question

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.

Alexa Ferguson · Answer

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!

Blake Novotney · Answer

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.

Julien Jeannot · Answer

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.

Vanessa Ivonne Hernandez · Answer

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!

Brandon Morgan · Answer

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.

Shawn Mcenteer · Answer

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?

Brandon Morgan · Answer

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

Jimmy Bostic · Answer

@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.

Taylor Dasch · Answer

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.

Owning rentals/ house hacking for single families?

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