Buying my first multi-family

15 Replies

Hello all, my credit score is around 700  and I plan on buying a multi-family when I graduate in 3 months and living in one of the units. I am looking around 2 places ( depending where I choose to work), Jersey City, or around the Bethlehem/ Allentown (Pennsylvania area). What are some good sources to find good deals in specific areas like foreclosures etc. Is anyone familiar with these areas? Where do you think in these areas I should look for good deals. How much flexibility do you think I have with my credit score? And lastly, what kind of loan or other funding strategy would be most helpful? Thanks!

Hi Michael Vieira. I live between JC and Allentown off I78. I briefly looked in Bethlehem but ultimately decided on NJ because of its close proximity to NYC. The locations you are looking at are very polarized in my opinion. JC will have Jersey taxes and a much larger metropolitan area. Allentown is more country living mixed with a hint of city life. Both will offer a range of prices from high to low. JC will have a very wide range from best of the best luxury and down. Allentown will be more compact, it will be more so middle class type properties mixed with lower end properties.

700 credit score is above average, you should be in good shape. How are you with income? You mentioned graduating in 3 months, have you been able to show an income? Lending typically requires 2 years of steady income to qualify for loans.

Michael,

Congratulations on coming up near graduation! Two years ago, I did exactly what you're thinking about doing. I'm not too familiar with the area that you mentioned, but the financing I am all too familiar with.

I bought a 4 unit owner occupy, and I net about $3-400 a month from it. I get paid to live there!! I used FHA financing so it only required 3.5% down, and at closing I walked out with $2000 in prorated rents which covered almost all of my down payment. It's an incredibly rewarding gig.

Take your time and make sure to find a good deal. I got extremely fortunate with the unit that I found, and I can contribute that to being patient. Use your gut, and find an experienced investor that you trust to give you a second opinion.

I wish you the best of luck in your journey, and feel free to reach out if you would like my outlook on anything.

- Kyle

Awesome thanks! I work full time during the summer months and part time during the semester, have a few jobs lined up for after graduation so I'm hoping that will ease the process. Also where do you think I should look for opportunities, ideally foreclosures or anything relative, as far as websites or any other internet source. I am new to this so I am not familiar with common websites or other popular sources.

@Shawn M. @Kyle Rountree My first response was for Shawn ( But Kyle If you know of any resources it would be much appreciated as well). And thank you guys, I really appreciate it, these are probably the best responses I got on a post so far. KYLE: Ideally I am looking for a 4 unit and I read about FHA financing in a book but I was wondering if that would be the best way to finance in my situation? Thank you again, I'll definitely let you know if I have any questions!

@Kyle Rountree When you talk about "prorated rents" are you talking about security deposits or simply just prepaid rent for upcoming months. Also, how did you attain these prorated rents at closing?

@Michael Vieira  


So when I closed on my deal, it was about 10 days into the month. So in my example, say the rents are $2500 per month. You would get the prepaid rent (20 days left in the month/30 days) 2/3 of the rent. That's how I was able to make back almost all of my down payment immediately.

I do highly recommend FHA financing for your situation. Being a college student, you do not need to show two years of previous employment history, as being a student trumps any sort of required employment (you may have to provide transcripts). All you will have to do is show current income to be within the Debt-to-Income standards. FHA financing is very beneficial because it's focused around first time home buyers. Unless you have 20% cash available to put down down to buy it with a conventional loan, the FHA financing is favorable.

Find an agent by asking friends and family members for references to start looking for possible buying opportunities

@Michael Vieira I used the MLS to buy, I am a realtor and I work with a local realtor as well. I did not look for foreclosure specifically I just kept an eye on whatever came on the market. I saw a lot of properties and found one that made sense. I actually canceled a contract I had with a short sale property to move forward with the property I currently own.

Hi @Michael Vieira

Assuming you have income, I would try to get a FHA loan and do what BP folks call "house hacking." Do a search on the site to read more about it. It's basically what others have suggested above, but using the above search term will get you more information about what you need to do.

@Shawn M. How long did it take you to get your realtors license and what do you look for to differentiate one property from another.

@Chris K. Thanks Chris! I hear the term used a lot on BP but will definitely look more into it.

Hi I live in the area and have a 3 family in the Ironbound section of newark under contract. My second go at house hacking. I looked at JC and Hoboken to start with as well but found that even with REOs / foreclosures its very difficult to make the numbers work. 

My suggestion if you are looking in Northern NJ is, cast a wider net. Kearny, Harrison, West NY, Guttenberg etc.  

Also read up on 203K loan; you can do a FHA 203K with 3.5% down. Below MV multi-families here typically need a fair bit of updates.

@Michael Vieira it took about a month to get license. 

The difference from short sale property that I ended up not pirchasing compared to the property I did closed on was location, work required, and most importantly return on investment.  The house I closed on was better all around. 

House hacking is a great place to start, especially if you're looking to get into multi-family investing. Sounds like you're open to moving and will be needing a place to live so I'd start by getting on Realtor.com, Zillow and start looking at what's on the MLS. Better yet, find a good Realtor in the areas you're considering and let them know what you're looking for. Your credit score is fine, but you will likely need 2 years job experience to get a conventional loan. If you don't have the work history or can't wait that long, look into hard money lenders in your area. You'll pay more in interest but it could help you get started. Or have a co-signer or partner. Good luck!

@Michael Vieira And just to add to the advice from @Chris Low (great advice) - if you get a co-signor, they need to be in a great credit situation. They need to be able to qualify to pay not only their own mortgage(s), debts, expenses but ALSO whatever the addition of YOUR mortgage would end up being as well (in case you personally were to default, the co-signor would be held liable to make payments). There are ways to eventually take the co-signor off the loan, but there would be some fees involved to do so (ppwk, qualifying for a new loan on your own to replace co-signed loan). Best of luck though man, you are certainly on the right track. House hacking is where it's at. 

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