Hey BP Family,
So I'm a newbie investor from NJ....
I know many posts start like this and I always walk away amazed by the amount of time and attention individuals still put into giving their thoughtful advice - so thanks in advance.
Back to my question, my wife and I have determined that the Buy and Hold method will be our strategy toward our ultimate retirement goals. We're currently looking to buy a 2 or 3 Family or find a Single Family and use FHA's 203k to renovate into a Multi. In either case we will Owner Occupy the property.
We just viewed a Single Family/ Mother-Daughter a few days ago and will go to revisit it this weekend with a general contractor to get some estimates before putting an offer.
Here's the main bullet point to note - the property is listed as a Single Family however after doing my due diligence and contacting the township I found that it was converted into a Two Family in 1965. The township agreed to zone it as a Two Family because it's somehow grandfathered in due to its previous status.
The current homeowner was illegally renting out the upstairs unit which is fitted as a one bedroom apartment and is why he listed it as a "mother-daughter."
What should I be looking for when I go to revisit the property this weekend? What questions should I be asking or what further due diligence should I be doing before determining whether or not this is a property worth investing?
Your feedback and expertise in this matter are greatly appreciated and my apologies for the long winded post.
All the best!
Your city's housing office probably regulates rentals in the area. Many cities require that you obtain (pay for) a license in order to rent a unit. I would contact this office asap to find out the status of this property and what would be required for you to be able to legally rent it. They may also have a file on this property, which you can review for status history and previous violations.
Forget that place, Find a legal 3 or 4 unit, buy it FHA if possible/desired - Owner occupied with $5000 or more back for closing costs. Bite the bullet and save the cash for a year and buy yourself another place with less units as your new primary, claim you need more space, just make it have less units then the last one. Learn how to paint and listen to excuses. My feeling is a duplexs are tough because all of your eggs are in one basket, if your other unit is vacant you are losing money. The idea with a house hack is to have the rents of the other units pay for ALL of the housing expenses (and hopefully a little cash flow) so that you save your current month-to-month housing expenses (and hopefully more). with a 3 or 4 unit you can have a vacancy and still be in neutral for a couple months, not going backwards. 2 months vacant on a duplex at $800 a month missing rent takes a year and 2 months to recoup your losses if you are cash flowing $200 per month (which you should be at least and I doubt a one bedroom apartment is going to get you there) I wouldn't go crazy on the rennovations ethier, fresh paint and fix the worst few things and put it on craigslist. Go big or go Home! Good luck
I spoke with the head of the community development department on several occasions to make sure I wasn't wasting my time with this property.
Here's the last email I received from them earlier this week:
Here are three simple steps you need to do when purchasing a property with the intent on renting it:
1)Have the sellers realtor get a Fire safety inspection performed by the Community Development Fire Safety office. (No C of O is required).
2)Register as a Landlord in the Community development Department.
3)Have a Housing Inspection performed on the rental units by the Community Development Department.
I'm not saying it has to be a difficult process but this just sounded way to simplified on my first read. I'm assuming once the inspection is done by the Community Development Dept they'll let me know exactly what needs to happen to make sure the property meets all the building codes.
How would you read into this from your vantage point?
I couldn't agree more with your strategy however there are other considerations I have to keep in mind, mainly my children staying in good school systems.
Purchasing a 3 or 4 unit property will most likely put me into neighborhoods I'd rather not live in, even if for just a year.
Fortunately, my wife and I are in a position where we should still be able to save up enough cash in a year to put down a down payment for our second property.
There are of course no guarantees and you bring up great points about losing big in the scenario where we have a vacant unit for several months and leveraging my risks by having more units.
Sound advice sir - really appreciate the feedback!
@Jay Velastegui That process sounds about right. An application and yearly inspections are common. Some cities and townships also have steep fees to obtain a rental license.
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