I am formulating a five year plan that involves my first purchase being a househack. However, I live in Brooklyn, NY and need to stay nearby for work. I am hesitant to invest near NYC because of the ROI and eviction laws. Of course finding the right deal makes everything great, but it seems to be a long shot here. Would anyone like to weigh in on if I should alter my plan?
Brooklyn and NYC in general is not worth investing in. Too many hedge funds and corporations have saturated the market with their expensive condos and apartments, its next to impossible for little guys like us to get in on the action. Your best bet would be to start looking out of state.
However, one key question I have for you is...Do you plan on continuing to work in NYC?
If you plan to continue working in NYC because of the salary then your best place to house hack is right over the Hudson river to NJ. There are areas over the tunnel/bridge where you can find Single or Multi families to live and rent out.
For me, I personally am not a fan of NJ because of their high property taxes. That is why I went 1 state over to PA for my primary residence and my rental property. Getting much better ROI.
Thanks Brian. This is pretty much what I suspected. Pennsylvania does seem like a much more feasible option. Do you find the market demand to rent is reasonable for your real estate goals?
@Patrick Crotty think about the Pittsburgh market. its really appealing and affordable. The landlord laws here are not very favorable to the landlord either but I am thinking its that way in most parts of the country.
Let me give you a background about how I acquired my SFR to give you some perspective. When I finally decided to get a rental property in my hometown of Allentown, I was dead set on getting a multifamily because of the basic logic of if one tenant does not pay on time at least the other one will. However, I came to a sharp realization of how competitive the multifamily market is here. I was getting outbid left and right.
Finally, feeling discouraged, my wife suggested I look for a SFH which I can turn into a rental. I was apprehensive at first because that just mean one tenant and if they don't pay, I am SOL. I looked anyway and found a great 4/1 house with parking and laundry being sold by the original owner. Closed within a month. We thought we would have to wait nearly another month before finding a tenant. That was not the case. The minute my wife placed the property on Facebook Marketplace and Craigslist, our phone couldn't stop ringing. My fears about vacancies with SFH quickly dissipated.
What I had analyzed from my experience is that 1) People, especially those with family would prefer to rent a whole house where they don't have to deal with other tenants above or below them 2) Families, especially those with kids don't like to move every other year, so they are more likely to behave when it comes to rent payments 3) If you provide amenities that are not easily available in other properties in that neighborhood like washer/dryer, parking or more than 3 bedrooms, you can stand to charge an above average rent because you are supplying convenience.
So to answer your question, demand for housing is just as high as New York or even greater. Due to that demand you have an easier pick of the litter.
Here is a practical advice --- assuming you need work in Brooklyn/NYC, take a look at the regional bus routes. For example, my area has a regional bus company that has multiple buses every day from Scranton/Wilkes-Barre to NYC. They stop at all these Pennsylvania towns on the way where NYC commuters live. I know many folks that do this commute routine. If it's something you can pull off, then you may want to look into that area.
Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.
@Patrick Crotty Hi Patrick, I found this blog to be an interesting read about the various states and which ones have landlord friendly legislation vs. tenant friendly legislation:
While it's true that here in PA where I live, the laws tend to favor the tenants, I believe that if you have good plan in place and do your due diligence, you will overcome any obstacles. If you ever want to consider investing long distance in a city that offers great cash flow opportunities, Pittsburgh PA may be right for you.
@Gary Swank This is a great blog with some very helpful information. Thanks!!
I don't know what your yearly income is but Brooklyn, New York is crazy expensive. My friend lives there and makes about $100K per year. He survives but only because he sold his Audi, and lives with another person.
Looking out of state is another great option. If you have friends or family nearby (to future property) they could help you manage it :-)
Having a small team to manage the property(s) can never hurt you.