Belleville, NJ · Member since 2015 · 88 posts · 33 votes
Hello everyone my girlfriend (soon to be fiancé) and I were looking for an apartment but then we realized that with the prices around our area is best to just buy a house. We are considering buying a two family house that way we can rent the other floor which will pay part of the mortgage. We also plan to move to Florida in the next year or two and we would like this house to be our first investment property. I am just looking for any tips or suggestions such as what expenses I will have and what expenses to consider and also do you think I should get an FHA loan because I know I do need to live in the property for at least a year with that loan. Any advice would be appreciated. Thank you
Rental Property Investor · Jacksonville, FL · Member since 2012 · 114 posts · 98 votes
10y
Hi Justin!
So you're wanting to buy a duplex in New Jersey, live in one unit for a while and rent the other, then hold on to the building when you move to Florida? Sounds like a solid plan, as long as your rental income is high enough.
I'm not familiar with the markets in New Jersey (sorry) but if you can find a property where one rental unit covers your costs - that would be the way to go.
Expenses to keep in mind:
Mortgage, Property taxes, Insurance
Utilities (Water/sewer/gas/electric) - pay attention to whether the building has separate meters, or not!
Vacancy and ongoing maintanence are difficult to budget for, so make sure you keep some cash in reserve.
An FHA loan can be a great tool to use - very low down payments required. However you may need to pay mortgage interest if you're putting less than 20% down - talk to a lender. Also FHA loans have fairly strict requirements about the condition of the property - needs to be top-notch!
I purchased my first property using an FHA loan - so if there are more details you'd like to know about, I'd be glad to help.
Rental Property Investor · Jacksonville, FL · Member since 2012 · 114 posts · 98 votes
10y
Hi Justin!
So you're wanting to buy a duplex in New Jersey, live in one unit for a while and rent the other, then hold on to the building when you move to Florida? Sounds like a solid plan, as long as your rental income is high enough.
I'm not familiar with the markets in New Jersey (sorry) but if you can find a property where one rental unit covers your costs - that would be the way to go.
Expenses to keep in mind:
Mortgage, Property taxes, Insurance
Utilities (Water/sewer/gas/electric) - pay attention to whether the building has separate meters, or not!
Vacancy and ongoing maintanence are difficult to budget for, so make sure you keep some cash in reserve.
An FHA loan can be a great tool to use - very low down payments required. However you may need to pay mortgage interest if you're putting less than 20% down - talk to a lender. Also FHA loans have fairly strict requirements about the condition of the property - needs to be top-notch!
I purchased my first property using an FHA loan - so if there are more details you'd like to know about, I'd be glad to help.
Real Estate Agent · Chicago, IL · Member since 2014 · 173 posts · 85 votes
10y
Hi @Account Closed said, I think this sounds like a solid plan that could benefit you in the long run financially. My question for you since you mentioned you would move to Florida a year or two done the line is, what is you and your Fiance's exit strategy? By exit strategy I mean, how do you guys plan to move and get out of the property? Would you rent in Florida, buy another property etc.?
My wife and I basically did the same thing but with a 3 flat and minus the moving to another state. We originally planned to use an FHA mortgage but ended up putting 15% down and going with a conventional mortgage. This allowed us to buy another 3 flat 9 months later by using an FHA loan. Our exit strategy for this house is to live here for 1 to 1.5 years while saving the cashflow from the now rental and our W2 income to move again. I would look into conventional financing options if you can. I know of a few people here in Chicago that were able to put 5% down and use a conventional loan to house hack 3 flats.
I know it's good wisdom to always have an exit strategy when purchasing a property but I also feel it's equally important to have a personal exit strategy in a house hack.
Investor · Tampa, FL · Member since 2013 · 2k+ posts · 1k+ votes
10y
@Yoochul C. and @Account Closed taxes are high in most worthwhile places. What NJ has if you purchase in the right area is rents that dwarf those taxes and make the potential for a great long term asset that will increase in value.
I'm personally very bullish on Northern NJ more so than I've ever been in the last 20 years. There are major projects taking place that will cement the area into a great place to live with ease of access into Manhattan, which is where most want to be and need to get to.
You can go FHA but sometimes the comps they use are lower than what's out there (which can hurt the sale). I had 2 clients who had problems with FHA appraisals and the deals almost fell apart because in my opinion the appraiser used the wrong comps to say the house wasn't worth the price, and yet there were plenty of comps that did support the price of the homes.
Once an appraisal takes place in FHA it stays in their system for 6 months. No other appraisal can take place (from what I've been told). That means if the house doesn't appraise and your deal falls through, if the next buyer tries to finance the home through FHA they will have to use that same appraisal and hit the same roadblock. So in most cases it will not be able to be financed with the 3.5% down. Be careful. Have other options from a good lender in place.
Lender · Lakehurst, NJ · Member since 2015 · 176 posts · 51 votes
10y
Hi @Account Closed said, little things like both units having separate meters are definitely something to factor in. But a live in 2 family is definitely the way to go if you are starting out as a new investors. I know a lot of guys that have gotten their start that way. It also might not be a bad idea to hold out and find a 2 family in Florida. It would be a lot cheaper if you are just starting out.
Investor · Wyckoff, NJ · Member since 2015 · 100 posts · 35 votes
10y
I agree with @Darren Sager. There are so many areas in NNJ that are positioning themselves as great places to live with easy access to NYC. Rental prices are extremely healthy, so like everything else, make sure you buy well.
I would suggest trying to find a HUD home or something else where you can add value. That's what I did on my first duplex, and I bought it in 2003 when the market was rising rapidly.