Hey fellas, I’m new to the multi family investing I’ve always wanted to get into it although never wanted to do it alone. Recently sold my house now have a place to live rent free so no rush, but I’m looking to purchase a multi 2 or 3 family with 3.5% down. With 3.5 % down I’m not finding any cash flow houses and barely finding anything that pays for itself. I’m not looking to invest outside of the New Jersey New York area I live in even though I know those are options. If anyone here can point me in the direction for things I should know going in it would be much appreciated. Just to fill you in I’m looking long term I don’t need the house to produce a return right away however I’m not looking for a burden that drains my pocket eithier. What do you guys think is acceptable it’s the New York nj market so it’s hard to find any house that will cash flow with 3.5% down initially thanks in advance to anyone who chimes in and remember I’m just starting out
Tony, first off- I'm assuming you know you have the same name as the former Boston Red Sox outfielder. Second- it seems like you have a relatable mindset in targeting long term growth. You should definitely speak with @Shawn Mcenteer who can help direct you in finding the right home for your needs.
Tony, first off- I'm assuming you know you have the same name as the former Boston Red Sox outfielder. Second- it seems like you have a relatable mindset in targeting long term growth. You should definitely speak with @Shawn Mcenteer who can help direct you in finding the right home for your needs.
Hey @Tony C.! First of all, congrats on thinking long term. Real estate investing is a marathon, not a sprint. Trying to answer your question, I would not buy something that is a burden from the start (might as well leave your hard earned cash in a savings account...). Having said that, there are out there opportunities, even in the (expensive) tri-state area we live in. I personally like the small multifamily properties in places like Westchester NY, where you can invest in properties with "good bones" and can push rents by doing some cosmetic updates (e.g. kitchen, bathrooms, lighting, painting, exterior siding, etc.). Yes, it's not easy to cash flow with 3.5% or 5% down, but at least if the property pays itself, that could be an opportunity to build equity and refi down the road. The market is interesting now because with interest rates having doubled compared to a year ago, there is much less competition to buy, and the sellers that have to sell (not too many) they are forced to lower their property's price. Much better to buy something at a lower price (never changes) than over-paying during a bidding war even if having a 3% mortgage IMO. You can always refi a mortgage but price is what it is. Another point I wanted to make is that I would rather do a 5% conventional mortgage over a 3.5% FHA loan. With the conventional, you can take out the PMI once you get to 20% equity, but the FHA has PMI for the life of the loan. Anyway, happy to help if you want to chat further. Take care.
@Tony C., based on your original post and latest response, I believe you have the right mindset going into it and seeing REI through a long term lens.
That being said, if you are looking to acquire something right now regardless of immediate cash flow, you may be better suited looking at long term projections rather than if it hits a certain percentage ROI or $CF at time of purchase.
For example, if you are able to secure a quadplex and live in one unit utilizing an FHA loan to get 3.5% down payment, you will have more benefits than just cash flow to consider. For example, your living expenses that would be going towards rent or a mortgage payment will be covered by someone while you live in one unit. This is also a good time to do updates while living in the unit, and rotate around the units as they go vacant and you finish updates, thus allowing you to continue increasing rents and get closer to or reach positive cash flow. All the while, the property value will continue increasing on average during your holding period.
You will want to check what the limit is on FHA loans in the specific counties and how that might affect the numbers. Doing a quick Google search, it looks like most (or at least many) counties in New Jersey and New York have an FHA loan limit around $1,089,300 give or take depending on the county and number of units.
Hope you find something that meets your criteria and gets you on the path to real estate investing success, @Tony C.! Best of luck!
@Tony Conigliaro Hey Tony. As a fellow small multi family investor and agent in NJ myself your goals can indeed be accomplished, as others have mentioned on this thread. I'd be more than happy to provide further insight and get a deeper look at what your criteria would be.
Hey @Tony C.,
Given the current market environment (limited inventory, higher rates), it's difficult, if not impossible, to find a rental property in Northern NJ area that will cash flow while you're occupying it, especially with just 3.5% down. The low down payment combined with the PMI will eat up a good chunk of what could be cash flow.
A more reasonable goal for the time being would be to find a property that allows you to live for as little as possible while you're occupying it, but would cash flow once you move out and the building is fully-occupied (and/or when you refinance into a conventional loan).