Hello BP community,
I would like to start by introducing myself a bit. I'm in my mid-20s, I live in NYC and currently work as a property manager for a medical institution that is continuously expanding their real estate portfolio consisting of luxury high rise apartments. As a property manager I have learned a lot from a landlords perspective. Just to name a few such as interacting with tenants, dealing with complex situations, documenting leases, being a handyman and turning over apartments for the next tenant. I sure have learned a lot and my experience has expanded from my job but that doesn’t make me a “landlord expert” by any means. I continue to learn every day and I am grateful for the BP community where I learn something new every day. I tend to over analyze but, now I'm ready to make it happen as there’s no better education than experience with trial and error.
The market in NYC is pretty high to say the least so I've been studying markets outside the area within a 2 hour drive such as:
Essex County, NJ(Newark, East Orange, Irvington)
Lehigh Valley, PA(Allentown, Easton, Bethlehem)
Connecticut( still learning markets)
Now here's the dilemma I'm currently facing which would also define with what market I should pursue. If I go with an investment loan I'll have higher interest rate, closing costs, 6 month reserve, 75% LTV bringing my upfront cost a lot higher than house hacking. By house hacking I'll qualify for owner occupied(FHA,conventional) benefits with lower interest rate and upfront cost, etc. Doing so will eliminate the idea of house hacking in PA because of the distance with it being just over 2hours and 90 plus miles from work. I must say I don't necessarily need to house hack as my job offers me a place to stay for nearly free but, I also wouldn't mind having a place away from work. If I house hack I plan to turn a basement unit into a living space. I won't be staying there all the time which also leaves opportunity to possibly air bnb the unit for the days I'm stuck at work. I plan to make the property strictly rental after 2 years and I have read that places like Newark, NJ have strict tenant friendly laws(major red flag). Which makes me second guess areas such as those.
I really HIGHLY appreciate any feedback as like I said I am still learning.
Please respond with any thoughts or suggestions.
I like the idea of house hacking in your case. There are a lot of multi family houses with layouts that you can make work for you in northern NJ. And my experience with landlord/tenant court in newark is that as long as you aren’t a slumlord and keep diligent records of payments you won’t have a problem getting non paying tenants out of your property.
Reading your post, I see you answered your own question in it! Definitely house hacking is great for your first deal - you'll have your own residence, you'll save a lot of money on your purchase and will be able to make money on it. So my advise is definitely go with the house hacking plan!
Just once you figure out the location you want to buy in, make sure there are no laws/limitations preventing you from renting out a part of your place. They differ from place to place drastically.
From what I know, CT is one of the tenant-friendly states as well. Probably PA would be a better bet in regards to landlord-friendliness, if you're OK with a 2-hour commute for 2 years. I wouldn't worry that much about it though, since you are renting only a part of your residence, so you will have more personal relationship with your tenants and will have some benefits over the landlords who do not occupy their properties. Just really put work into screening the tenants and don't be afraid to spend more time finding the right tenant.
Well Pa is more landlord friendly . I wouldn’t even waste my time investing in NJ from what I’ve heard but your results may vary . Get a multiplex house as many units as you can get (4 is max obviously) under one roof .House hack it at fannies 3.5% and stay in the worst / smallest unit in the building . Save your money up from your w2 job and your rentals . Do a cash out and add your savings and do it all over again with another multi unit house
@Dennis M. I'm assuming NJ taxes is the deal break? or am I missing something else.
@Marina Draper haha, yes I'm pretty much leaning towards house hacking. Just not sure if ill hurt my ROI by staying in a unit that I will potentially barely stay in.(Work)
@Allan Szlafrok any towns in northern NJ in particular I should maybe consider? Im not scared of the "ghetto" just rather not reside in the worst of the worst.
@Cesar Medina there is a good podcast from Sunny and Sunmarie (if I remember their names correctly). They are a couple from NJ who house hacked and had two properties with 7 units. I think they are in Arlington NJ. You can listen to that podcast to get some ideas. It’s a reasonable commute to NYC. Lehigh Valley in PA is too far in my opinion. I have an investment property there and talked to people who live there. The commute to NYC can be as long as four hours (one way) if the traffic is bad.
Coming from another person close to your age, I did it the investment way first. If i could do it all again i would have done house hacking with a multi unit building to kick things off. I just think its a smoother path and less bumpy than owning investments outright.
If I knew back then what I know now I would say Hack, essentially get a 3 bedroom minimum hack the two bedroom out or if you are a family guy look into a duplex and hack the bottom floor .
Hey Stephen, I just recently heard the podcast(I believe #210) you are speaking of. Which is what made me completely reevaluate my initial strategy of buying an investment property in PA. I’ve been considering house hacking there(PA) but, lenders told me there wouldn't be any chance because of the distance in the commute. I guess Fannie Mae has some restrictions with commute. I've been pre-approved for an investment loan with a local bank, dealt with agents and pretty much only had to close on a deal at this point in the Lehigh valley, PA area. Even for an investment property I found it pretty long just when I went out to see some homes but, I guess when you finally own the property you wont need to travel as much like I was (1-3 times a week).
@Cesar Medrina,Sometimes you have to make a move for the best!
Hi @Cesar Medina if I were you I would steer towards the house hacking. It's a great way to get your feet wet, possible live for free, and learn about property management all at the same time. Good luck
@Cesar Medina house hacking is the best way to start to keep your risk to a minimum and to learn. We buy 3-4 properties a month now but 30 years ago I started with my first investment house hacking. Made a lot of mistakes but learned from them and the rest is history
@Alex Deacon thanks Alex, means a lot coming from someone who's been through it.
@Cesar Medina in case you're interested Sunny is speaking at the SJREIA Central meeting this Thursday