Beacon, NY · Member since 2016 · 11 posts · 2 votes
I've been reading horror stories of buying an FHA multifamily property in Brooklyn and the burroughs around NYC. Everything from limited amount of properties available, to brokers and agents not wanting to deal with FHA clients, to needing a "gift letter", etc. Seems pretty daunting.
My plan was to house hack a duplex or triplex in Brooklyn with my girlfriend, something around 600-800k using FHA, and use the rent income to cover the mortgage. In this market, do you think that's feasible? We have more than the required downpayment ($40k) but not enough to put down 20% for a conventional loan. Any thoughts, opinions or feedback are greatly appreciated.
@Jordan Moser@Antonio ArtusaWhat you need is to find a mortgage banker that can do a Fully Approved Loan with the address at TBD. In this scenario your loan goes through underwriting and is approved pending appraisal/inspection/title of the property. This way you can bid without a financial contingency. This is the closes you can come to a cash over without being a cash offer.
@Jordan Moser@Antonio ArtusaWhat you need is to find a mortgage banker that can do a Fully Approved Loan with the address at TBD. In this scenario your loan goes through underwriting and is approved pending appraisal/inspection/title of the property. This way you can bid without a financial contingency. This is the closes you can come to a cash over without being a cash offer.
Jordan Moser it's definitely true that in a multiple bid environment sellers don't want to deal with lowly FHA buyers. There's always a risk that the property won't appraise, and they want to know you can cover the difference in financing with a larger down payment.
I'm facing the same issue. It's not impossible but you might have to settle for paying above ask, or searching in a less hot neighborhood. You're competing with cash buyers and people putting 20-40% down in the hot neighborhoods like bushwick, BedStuy, etc. so you have to differentiate yourself somehow. Shoot me a PM if you want to compare notes. I've been at this for several months at this point.
Real Estate in NYC is a whole other animal from pretty much anywhere else in the country. A lot of the techniques that are discussed on BP are simply irrelevant when applied to NYC. Properties are limited, or better explained, many of them are off market.
I definitely believe it is possible to buy a house with an FHA loan. I am a realtor based in Bed-Stuy and I have worked with multiple clients who only used FHA loans. The areas they were looking to purchase in were East Flatbush, Flatlands or East New York.
@Upen PatelI haven't heard of this before but I will be asking the mortgage bankers I work with about a Fully Approved Loan with address at TBD.
You have to realize though that FHA will not allow you to buy in certain areas like Bushwhick and Bed-Stuy like @Eric A.mentioned. The properties there are so highly priced that banks prefer clients with a large amount of equity already in the property. Furthermore, I don't believe it would be possible to House-Hack properties in that area because mortgage payments would be too high.
@Antonio ArtusaIf you look in the right areas, a FHA loan is very possible.
I would love to sit down with anyone interested to discuss this further.
@Shmuel Harris- Thanks for your reply, really useful stuff. Good to know FHA is still possible in some areas.
Would love to meet up to discuss, I'll shoot you a PM.
It makes sense FHA househacking would be tough in the hot neighborhoods. Could you see it being a possibility in Crown Heights, Brooklyn Heights, Prospect Lefferts Gardens, or even somewhere like Ridgewood, Queens? Good to know East Flatbush, Flatlands and ENY are all options. Are there any additional safe, up-and-coming areas you'd recommend?
My pleasure. I am happy to see that I can contribute to the BP community. I owe my RE education to them. So I definitely believe we will be seeing a trend outwards from Manhattan. As time goes by, there will be more and more people pushed out of East Flatbush, potentially even Brownsville, as prices trend upwards. But I believe that this may be more of a waiting game. What I am finding is that at this time it is hard to find motivated sellers, due to the amount of RE activity that has already taken place. Places like Queens you will definitely have more options to house hack. Crown Heights is already past the wave of pricing that would allow you to purchase a house-hack, for example we have a listing for $899k in Crown Heights. It is a one family attached property. Definitely not a good example of something to house hack. Prices are really high there due to the large jewish Chabad community and its proximity to the subway.
Just for some market info. I'm house hacking in Brownsville because I was priced out of BedSty. I got a 3 unit for $515k in July 2014. The price was top of the market at the time. Still might find stuff here, but it looks like the real growth is in East New York.
Your only chance to "house hack" in the truest sense of the word is to purchase a 3- or 4-family (not 2) in further out areas such as Brownsville, ENY/Cypress Hills, and East Flatbush (the farthest reaches), Flatlands, and Maybe Canarsie. You'd be looking at a 1 hour + commute to midtown in all these areas and crime might still be an issue depending on the block.
Then again, a rising tide raises all boats so I can see good appreciation in all these areas over the next 5 years as Brooklyn 'the brand' continues to go global.
@Jordan MoserI'd say that FHA is going to be virtually impossible in Crown Heights or PLG (and definitely not Brooklyn Heights...Brooklyn Heights is more expensive than most of Manhattan) -- you'll find that most sellers will want at least 10% of the purchase price as an earnest money deposit, let alone a down payment. So even by waiving the financing contingency (which I've done after doing what @Upen Patelsaid and getting a commitment letter in advance) you'll still need to come up with a substantial amount.
The further out you go and/or the more willing you are to live in less-safe neighborhoods, I'm sure the higher likelihood of using an FHA is. Maybe eastern Crown Heights (Weeksville) or eastern Bushwick, but more likely Brownsville/East New York/Canarsie, etc.
Definitely easier to do with conventional financing, though still pretty difficult. But there are 3-units out in east Bushwick and eastern Crown Heights that you could do okay on by house hacking them.
Is it possible to get a conventional loan with a 10% downpayment in Brooklyn, or even Ridgewood, Queens? What would you do with 40-60k of funds for a downpayment?
You don't go to the grocery store without money in their pocket. Right? Everyone says it and it is true... your best bet is to speak to a good lender first. He/she will look at your entire financial picture and you can determine the best route to go with your $40k-$60k.
Once you know your options, then you can start with the real estate search. After you step foot in a few places, your requirements again may change.
I'm working with one investor right now who is probably going to end up going conventional on a 2 flat because there is nothing that meets the FHA requirements on a 2-4 flat in good areas of Chicago. I don't know the Brooklyn market, but I suspect you run into the same challenges we are facing. Great building, terrible area or terrible building, great area. Another buyer originally contacted me wanting to but an investment property, but ended up buying a beautiful 2 bedroom condo to live in. He is going to save for a downpayment on a 2-4 flat next year, or rent out his condo and move onto something else.
@Jordan MoserRe: 10% - you'll have to ask banks for that. If you have good finances and you can get and then show a commitment letter to lend on 10% down, then sellers won't care if you waive financing. But you'll have to be damn sure it appraises to value otherwise you'll have to scramble to make up the difference and put your deposit at risk.
To answer the 2nd, it seems from your profile on here and your AirBNB experience that you're willing to rent out rooms in your primary living space. If you can do 10%, there are definitely duplexes (with 2 3 beds or whatever) for ~$600K in the Flatbush area that you can make work if you're willing to rent out the other 2 rooms in your unit. The more creative you're willing to be, the more places are in play. I'd probably do my best to find a 3-unit place in Weeksville or Eastern Bushwick that will FHA for around ~900K and you can probably get enough to cashflow a tiny bit if you rent out the rooms in your unit. And then if you absolutely cannot do that with an FHA, either save up a little longer or switch to looking for a duplex and do 10% down on that.
Is it possible to get a conventional loan with a 10% downpayment in Brooklyn, or even Ridgewood, Queens? What would you do with 40-60k of funds for a downpayment?
I recently spoke to a mortgage broker who told me she could get me into a conventional loan with 90 CLTV (80-10-10) with prices as high as $1mm (or more) on an owner-occupied multi family in the NYC area. No PMI either. PM me if you'd like her info. The challenge there is that with "only" 60k down, you'd be limited to a 600k property, and you haven't even paid closing costs yet. If I had 60k to use, I'd probably stick with FHA but just go to a less sexy area with less competition, that is ripe for appreciation (Ocean Hill, Cypress Hills, East Flatbush, etc.). Alternatively, if you don't need to live walking distance to a subway, you can find some decent properties in safe neighborhoods in Queens such as Middle Village, Glendale, Maspeth, Woodhaven.
"- you'll find that most sellers will want at least 10% of the purchase price as an earnest money deposit, let alone a down payment. So even by waiving the financing contingency"
If the seller wants 10% earnest money does this 10% eventually go toward the down payment?
I think securing an FHA also depends on the lender you are dealing with. I found one in NY that specializes in FHA and finding creative ways to make it work in Brooklyn.
Is it possible to get a conventional loan with a 10% downpayment in Brooklyn, or even Ridgewood, Queens? What would you do with 40-60k of funds for a downpayment?
... If I had 60k to use, I'd probably stick with FHA but just go to a less sexy area with less competition, that is ripe for appreciation (Ocean Hill, Cypress Hills, East Flatbush, etc.).
I need to start talking to a lender but I believe I might be looking in this area. I would like to househack my first property but how would I go about determining the best competitive rates that would provide me with positive cash flow. How would I know what are reasonable rental rates for the area and how to project vacancy rates to properly forecast out cashflows.
@Jordan Moser Cypress Hills is a good middle ground. Not too far out. Safe. Definitely some multi-families out here that would accept FHA. Hit me up if you want to talk.
@Daniel Montes I am also looking into Staten Island. Lots of nice homes for a cheaper price compared to the rest of NYC. I have been running the cash flow numbers (for buy and hold) on some properties in SI.
very nice topic as I'm also in NYC and was looking to invest in other places like Jersey or Pennsylvania. The prices in NYC are to crazy. Glad to see some people still making it happen.
I'm new to BP and I thought I would take this opportunity to say hello and add my two cents on a topic I have experienced the frustrations of first hand. Guess Im one of the lucky ones. I purchased 4 family located in Brownville/ East Flatbush area of Brooklyn in July of 2014. Purchase price was under $500k. Purchased property with FHA 203K, under $60k (property not gut job just needed updating cosmetically) . I would be glad to provide lender info or answer any qiestions. Just PM me for info. Bottomline, it can be done just takes finding right lender, patience and persistence. I'm so glad I found out about BP. So nice to know other investors are experiencing joys and frustrations of investing in Brooklyn real estate. Nice to have voices of motivation when you may feel like calling it quits. Im very thankful for all this wonderful feedback, its such a gift.
Were you able to increase your qualifying income based on the rental income? If so, was it discounted and did you have tenants already occupying the apartments or where they vacant at the time of the loan origination.?
I am not sure of the rules if we are allowed to post the names of lenders that we found that can help expedite the FHA process in Brooklyn. If anyone wants to PM me I can give them the name of a mortgage broker that is helping me secure an FHA loan on a multifamily in Brooklyn. (We have yet to secure a deal, due to the fact that we are very specific in what we are looking for). I do have an offer out now, just waiting to hear back.