First Deal with a Goal of House Hacking

16 Replies

Hey everyone! I've been listening to the BP podcast for months now, and I've finally decided to dive into this. 

I'm currently brainstorming ideas for my first deal, and I have some very specific criteria in mind. I'd just like to bounce these ideas off you more experienced investors and, hopefully, learn a few things. With full transparency, please allow me to explain my current situation:

I've graduated college recently and begun my first real intense occupation. I'm currently a medical device sales rep for a large corporation. For those who aren't familiar with this style of job, I'm on the road all day every day - I'll support a surgery in the morning, bounce from one hospital to another, to various Dr. offices, and so on. I currently live in Bethlehem, Pennsylvania, but my territory is now northern New Jersey, Manhattan, Brooklyn, and Queens. Most of my time is spent in north NJ, Brooklyn, and Queens more specifically. I drive a car (no worries, it's on the company), and no, unfortunately I cannot take a train every day into the city due to the fact I may visit multiple accounts in one day. 

I have to move for my job, preferably as close to NYC as possible. My desire is to move into northern NJ and close to the city. Sure, most guys my age (23) want to head into Hoboken or Jersey City to have a blast, but it is incredibly expensive and there's virtually no such thing as parking. Not to mention, purchasing a home in either of those cities will be far outside of my budget for a first-timer.

My goal here is to buy a duplex for my first deal and house hack, or rent out, the other apartment. I currently make around $70k. The most desirable area for me to live would be Englewood, NJ. It's not too expensive, in a nice area in Bergen County, and close to my accounts in New York City. However, I find it difficult to find much online in terms of duplexes or multi-family. I plan on speaking with a realtor about the area specifically. However, I wanted to bounce this off all of you as well. I've found numerous single family homes or condos in Englewood that are very spacious, nice looking, up-to-date, and very affordable (less than $100k). Many of the duplexes or multi-families I've been finding online are upwards of 300k. Even with an FHA loan, it's a bit too risky for me on a first deal. Not to mention they seem to be in poor shape.

My major questions to you all are if anyone is familiar with North Jersey, or what your thoughts are on a condo vs house hack, etc. Thank you for your invested time in reading this!

VV

Since you are going to occupy, you could go the FHA 203k route if you are finding properties in poor condition.

Some sections of Englewood aren’t the greatest. I would try to stay close to the downtown if you can.

Northern Bergen County doesn’t have much multi-family stock in general and the continued trend of low inventory isn’t helping.

Some things I don't like about condos. HOA fees tend to go up over time and sometimes there are additional assessments if the complex needs major work done and it's not in the HOA budget.

We are getting towards the peak of the market in my opinion and condos are one of the property types that goes down first and takes longer to recover.

Lastly, if you go the FHA route, not all complexes are FHA approved.

Kevin Hill, Real Estate Agent in NJ (#0894817)
201-214-1349
Originally posted by @Kevin Hill :

Since you are going to occupy, you could go the FHA 203k route if you are finding properties in poor condition.

Some sections of Englewood aren’t the greatest. I would try to stay close to the downtown if you can.

Northern Bergen County doesn’t have much multi-family stock in general and the continued trend of low inventory isn’t helping.

Some things I don't like about condos. HOA fees tend to go up over time and sometimes there are additional assessments if the complex needs major work done and it's not in the HOA budget.

We are getting towards the peak of the market in my opinion and condos are one of the property types that goes down first and takes longer to recover.

Lastly, if you go the FHA route, not all complexes are FHA approved.

 Kevin, thank you for your reply and expertise.

Are there any areas you recommend on the eastern side of north or central NJ with more abundant multi-families? 

If you want to stay in Bergen County, southern Bergen County has more options. Lodi & Garfield has some affordable 2 families. Avoid the flood zones though. Hackensack has some 2 families too, but some are in less desirable areas. Essex country has many 2 families, but some towns are sketchy and the taxes tend to be high (not that Bergen County's are cheap by any means).

If you stay on top of what's available, sometimes you can get an affordable 2 family in Dumont.

This time of year, inventory levels are even lower. Can you wait until spring to buy? Will be more options to choose from.

Kevin Hill, Real Estate Agent in NJ (#0894817)
201-214-1349

Hi Vincent, 

Don't be afraid of the multifamily! Housing hacking can be a powerful tool to help build equity, reduce your monthly expenses and allow you to save more to invest more. 

If you still feel like a multifamily is more than you can handle, consider getting a 2 or 3 br condo and renting out the other bedrooms to roommates to cover your mortgage.

You should look into Union City, NJ. There are many multifamily properties with parking in the area. Union City offers easy access to Manhattan, Hoboken & Jersey City.  And since it isn't as hyped up as other cities in Hudson County, prices are still relatively affordable. 

Originally posted by @Kevin Hill :

If you want to stay in Bergen County, southern Bergen County has more options. Lodi & Garfield has some affordable 2 families. Avoid the flood zones though. Hackensack has some 2 families too, but some are in less desirable areas. Essex country has many 2 families, but some towns are sketchy and the taxes tend to be high (not that Bergen County's are cheap by any means).

If you stay on top of what's available, sometimes you can get an affordable 2 family in Dumont.

This time of year, inventory levels are even lower. Can you wait until spring to buy? Will be more options to choose from.

 Thanks for the info. I could possibly wait until the Spring, however, I am really dreading this commute. On days when I am in Queens or Brooklyn, the drive back to PA could be 3 hours+ with traffic. I usually get to stay in a hotel for the night, but the commute there and back is still brutal regardless.

My concern with Lodi or Garfield would be their distance to NY. Not too far from Manhattan, but over an hour to Brooklyn or Queens without traffic. If I have to be at a hospital at 7:30-8am, I'd prefer not to drive that distance.

Originally posted by @Mala S. :

Hi Vincent, 

Don't be afraid of the multifamily! Housing hacking can be a powerful tool to help build equity, reduce your monthly expenses and allow you to save more to invest more. 

If you still feel like a multifamily is more than you can handle, consider getting a 2 or 3 br condo and renting out the other bedrooms to roommates to cover your mortgage.

You should look into Union City, NJ. There are many multifamily properties with parking in the area. Union City offers easy access to Manhattan, Hoboken & Jersey City.  And since it isn't as hyped up as other cities in Hudson County, prices are still relatively affordable. 

 I'll definitely look into it - thanks!

I've heard from others that Union City isn't the safest area, however. Is this accurate?

I️ would say that you should look into the city of Bayonne @Vincent
I️ have a great agent over there.

Originally posted by @David Lichtenstadter :

I️ would say that you should look into the city of Bayonne @Vincent
I️ have a great agent over there.

 Would I be able to reach out to him/her?

I'd be very cautious about a condo (speaking from personal experience here...). You're subject to 1) dealing with the HOA and their decisions, 2) paying HOA fees every month, which can seriously hurt his margin, and 3) rent restrictions, where the complex only allows a certain percentage of properties to be pure rentals (fine if you live there, but if you move, you can't hold onto the property as an investment).

I house-hacked my 2/2 into a 3/2 by closing off the dining room into a 3rd bedroom. It's a great location, and the rent covers a little over the cost of the mortgage each month, leaving me to just pay the HOA fee. The biggest downside isn't the HOA fees though; it's the rent restrictions. If I could go back, I'd probably go single family so that I could move in a year, get a low down payment requirement on my new property, and still keep the old as a rental.

Originally posted by @Michael Ehmann :

I'd be very cautious about a condo (speaking from personal experience here...). You're subject to 1) dealing with the HOA and their decisions, 2) paying HOA fees every month, which can seriously hurt his margin, and 3) rent restrictions, where the complex only allows a certain percentage of properties to be pure rentals (fine if you live there, but if you move, you can't hold onto the property as an investment).

I house-hacked my 2/2 into a 3/2 by closing off the dining room into a 3rd bedroom. It's a great location, and the rent covers a little over the cost of the mortgage each month, leaving me to just pay the HOA fee. The biggest downside isn't the HOA fees though; it's the rent restrictions. If I could go back, I'd probably go single family so that I could move in a year, get a low down payment requirement on my new property, and still keep the old as a rental.

Great info - I had been skeptical of condos but the prices were tempting me. Glad to see someone can justify a decision with examples. How heavy can HOA fees be?

Hey Vincent,
I am also looking to House hack a duplex/triplex on my first deal. Just wanted to wish you luck on your first deal. Please let us know how things turn out I’d be interested to know. Also, you may consider renting in that part of the town for a while to become familiar with the area and also avoid the horrific traffic. Best of luck!
-Frank M.


Great info - I had been skeptical of condos but the prices were tempting me. Glad to see someone can justify a decision with examples. How heavy can HOA fees be?

@Vincent Villani , it all depends on your market and the complex itself. When I was shopping for my personal home, I saw some in Atlanta which were <$200/month and others which were >$400/month.

Depending on the financials, it's possible that a condo could be a good deal. I think most people avoid condos as a rule of thumb because they know that 95% of the time, the numbers aren't going to make sense. I've seen a few articles on the Bigger Pockets Blog about the advantages/disadvantages of  condos, so it's worth a search around the site if you haven't done so already.

@Vincent Villani I own one condo in JC Heights which I house hack and another in nearby North Bergen. My tenants' rents in both properties cover my mortgage, taxes, HOA fees, and provide $250-450 of cash-flow every month. All that is to say that a condo can work in some situations if you know the risks/benefits and you pay the right price. As others have said, the big down-side with condos is that some of the decision-making is largely out of your hands. If the condo association wants to do some aesthetic work in the building's garden, you and everyone else in the building are on the hook for the tab. This can obviously hurt an investor's bottom-line as these changes don't always boost the property's value (higher expenses w/o the correspondingly higher rent/market value that any good investor demands). That being said, if you're okay losing some authority/control, don't shy away from condos especially if you're looking for a low-risk entry into real estate. I say low-risk because the main benefit of the condo structure in my mind is that costs are shared. If the roof suddenly needs to be replaced, that cost is spread across the apartments instead of just yourself as it would be with a single or multi-family. PM me for any further area-specific questions.

Originally posted by @Marc Weisi :

@Vincent Villani I own one condo in JC Heights which I house hack and another in nearby North Bergen. My tenants' rents in both properties cover my mortgage, taxes, HOA fees, and provide $250-450 of cash-flow every month. All that is to say that a condo can work in some situations if you know the risks/benefits and you pay the right price. As others have said, the big down-side with condos is that some of the decision-making is largely out of your hands. If the condo association wants to do some aesthetic work in the building's garden, you and everyone else in the building are on the hook for the tab. This can obviously hurt an investor's bottom-line as these changes don't always boost the property's value (higher expenses w/o the correspondingly higher rent/market value that any good investor demands). That being said, if you're okay losing some authority/control, don't shy away from condos especially if you're looking for a low-risk entry into real estate. I say low-risk because the main benefit of the condo structure in my mind is that costs are shared. If the roof suddenly needs to be replaced, that cost is spread across the apartments instead of just yourself as it would be with a single or multi-family. PM me for any further area-specific questions.

 Marc,

How do you house hack a condo? I'm assuming it's a 2bd and you're renting out the other bedroom. The $250-450 cash flow is a combination of both properties, correct?

Originally posted by @Frank Macias :

Hey Vincent,
I am also looking to House hack a duplex/triplex on my first deal. Just wanted to wish you luck on your first deal. Please let us know how things turn out I’d be interested to know. Also, you may consider renting in that part of the town for a while to become familiar with the area and also avoid the horrific traffic. Best of luck!
-Frank M.

 Thank you much!

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