Bloomfield, NJ · Member since 2019 · 6 posts · 4 votes
Hi everyone! I'm currently in the process of saving up for a down payment, reading as much as I can about investing and looking through homes for sale. I was wondering what your take was on investing in multi family homes (in areas such as Newark or Jersey City) vs single family homes in better areas in NJ. Which do you think would be better/make more sense and why?
Bloomfield, NJ · Member since 2019 · 6 posts · 4 votes
7y
@Joe Ehren Thanks for the reply Joe! What I've read about single family homes is that 1) Renters tend to take better care of the property since it feels like their personal home and 2) Due to the emotional aspect attached to buying a single property (which is typically a primary residence) the price tends to be driven up when it comes time to sell. I suppose with multi families you're looking to sell to other investors who are always hungry for a deal so this makes sense. Thanks for your input!
@Stephanie Danos I am also at the same step in the process and want to invest in the same areas as you. I went back and forth about multi vs single for a while. I plan on house hacking so a MFH seemed like the right route but there are SFH that could have a second unit but not advertise as a MFH. For that reason, I haven't necessarily settled on one over the other just yet but I am inclined to go with a SFH because of all the things you mentioned and its less inexpensive to get in the game.
Bloomfield, NJ · Member since 2019 · 6 posts · 4 votes
7y
@Marsha F. Hey Marsha! House hacking definitely seems like the way to go. I know people who started that way and they recommend it to start off as well. My only issue with that is that I'm not sure that I want to live in the areas I'm looking at investing in. Great to hear from another newbie in the area! :)
Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes
7y
@Stephanie Danos I think house hacking in one of those cities is the way to go. Taxes are more reasonable and there has been really great price appreciation there over the last few years. Also as an owner occupant you won't be subject to any rent control laws which is nice. I also think when you move to sell you'll have a bigger pool of potential buyers because a lot of people like having that income from the second unit to help with the mortgage. Personally I don't bother with SFH in NJ. I get more $ per square foot on a 2 family than if I rented the same number of beds/bath in a one family. I just think it makes more economic sense to be investing in 2 family houses.
Rental Property Investor · Jersey City, NJ · Member since 2018 · 10 posts · 2 votes
7y
@Stephanie Danos You would be able to find more affordable properties in Newark with better returns. The Jersey City market is more expensive, although the Greenville section of Jersey City has much more affordable properties. I am currently on the market for a multi family as well, but I am looking down in Mercer County because of the cheaper prices.
Real Estate Agent · Bloomfield, NJ · Member since 2015 · 89 posts · 80 votes
7y
Hi @Stephanie Danos! Welcome to Biggerpockets! Awesome to hear you are starting your real estate investment journey.
Being from Jersey, investing in Northern NJ and Managing Properties for other clients here in Essex, Bergen and Hudson County I definitely understand the challenges of investing in NJ. I'll point out some benefits of investing in multi-families rather than investing in single family properties.
1) Taxes - If you analyze 1-3 family units, you'll realize that in most cities in Northern NJ taxes for 1-3 family properties will range around $7,000-$12,000, (approximately) meaning that the more units on a lot, the lower tax per unit price you will be paying.
2) Capital Expenditures - Things such as the property's siding, roof, and windows; when purchasing a multi-family dwelling, whether you are purchasing a 1 or 4 family property, in most cases you will only have one building to worry about, meaning, one roof, normally 4 walls of siding, etc. Yes, in most cases the multi-family property will be slightly bigger, but in most cases you will benefit from the fact that is only one building and not several 1 family homes, roofs, sidings.
3) Vacancies - When renting a 1 family home, if the tenant vacates the property unexpectedly you will have no cash-flow coming in. When purchasing a 3 family home, in my experience, if you purchase it correctly, in most cases you will be able to cover most of your expenses with the rents of 2 units, (This is assuming you purchase it at 25% down). Even the perfect tenant can run into financial or sometimes personal issues that will force them to move without notice, trust me, it just happened to us lol...
Bonus - Going back to my 1st point, I think you may have a hard time finding cash flowing 1 family homes here in Northern NJ due to the high taxes.
There are several other benefits but I don't want bore anyone ;) - Although as you mentioned in some cases single family renters may be a bit more caring for the property, this is not always promised. Let me know if you have any additional questions!
@Dwayne Lee I don't know the Jersey City area very well, but from what I have read here on Bigger Pockets is that Greenville is a less desirable area. Is that true?
@Shawn Krieger I haven't really looked outside of the NJ market but I will expand my research to include Brooklyn. Thanks!
@Moises Mari Thank you for this information - its very helpful! I hadn't thought about CapEx being spread out over multiple properties for single families vs a multi unit. This all makes a lot of sense. Do you suggest a 25% down payment at minimum?
Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes
7y
@Stephanie Danos What i said was you ARENT subject to rent control. Thats a good thing. And if you are checking out Jersey City take a look a the West Side. Not terribly expensive and safer than Greenville.
@Dwayne Lee I don't know the Jersey City area very well, but from what I have read here on Bigger Pockets is that Greenville is a less desirable area. Is that true?
@Shawn Krieger I haven't really looked outside of the NJ market but I will expand my research to include Brooklyn. Thanks!
@Moises Mari Thank you for this information - its very helpful! I hadn't thought about CapEx being spread out over multiple properties for single families vs a multi unit. This all makes a lot of sense. Do you suggest a 25% down payment at minimum?
Would love to collaborate on a deal lmk if your interested