should i start with a SFH or MFH in central jersey?

Question

After analyzing the local Mercer County market I've noticed there are not that many MFH that are desirable meaning cash flow can occur, but appreciation, schools and good tenants will be at risk. Granted MFH are more common in rougher parts of central jersey and my purchasing power can't acquire me something in North Jersey here homes are much more desirable when it comes to appreciation and schools and safety. In addition, I live with my parents so even househacking will still cost me over $400 a month, which is what I pay to stay with my parents.

My question is should I stick to a SFH in my local market in a good area or South Jersey? My purchasing power can afford me a house down there and I also work in South Jersey (Cherry Hill) and live in central jersey. What's at risk is it may not cash flow and renting is not so common in South Jersey, but I would feel more comfortable investing in a good area where schools are decent to good, and tenants are likely to care more. I would then plan to use this forced equity (since I plan to buy a fixer upper) to invest in another home.

I have been constantly reading to househack right into the MFH, but this may take some time for me to acquire the money and purchasing power. Are there better ways to funding this? The current leverage my family has is their home equity, but I honestly plan to invest within the next year due to capital shortage. I have ALSO heard its not about timing the market rather time IN the market, so this is where a SFH could potentially be "easier" to find.

Im constantly in a headspace where I tell myself I have to get really creative to finance a MFH or come in with a 5% conventional loan and fixing a MFH to force appreciation although cash flow may not be there the first year or two.

Similar with a SFH: I can at least get in the market with a 5% conventional loan not expecting cash flow but hoping appreciation will help me out in the next 2+ years and I will at least be able to put up the remainder of the expenses since I do live with my parents.

I am young so I could be overthinking, but my end goal is to have a portfolio where I can cash flow enough within the next 5-15 years to let go of my job (5k clean a month). Im 23 and will continue to work until 30-35, and by then I would be able to either continue working BY CHOICE rather by necessity.

Andrew Kiel · Answer

Here's a few of my thoughts:

• 
• Positive cash flow is key in your situation. Don't settle for properties that merely break even; aim for those that generate consistent income from the start. This positive cash flow will provide a financial buffer and support your long-term investment goals.
• Multi-family (MFH) and single-family homes (SFH) are distinct asset classes with different characteristics. It's a misconception that MFH is inherently better than SFH. Each has its own advantages and challenges, and success depends more on the specific property, location, and your management approach.
• The "forever apartment" concept rarely exists. Most families aspire to live in houses, which can impact long-term tenant stability in MFH properties.
• Creative financing is valuable for either property type. Continue exploring various strategies to optimize your purchasing power and minimize upfront costs.
• Using an FHA or VA loan for MFH acquisition can indeed be advantageous, offering lower down payments and favorable terms. This could be a strong option if you decide to pursue multi-family investing. Just keep in mind this is a typically one and done type of financing as it requires owner occupancy.
• Neighborhood quality is crucial and cannot be overstated. Properties in good areas, whether SFH or MFH, tend to attract more stable, responsible tenants who maintain the property better. This factor significantly impacts your long-term success and stress levels as a landlord.
• Be wary of theoretical numbers, especially for C-class properties. They may look promising on paper but often underperform in reality due to management challenges and unexpected expenses.

Given your situation, a SFH in a good area of South Jersey could be a solid starting point. It aligns with your work location, offers potential for appreciation, and is likely to attract quality tenants. While it may not provide immediate high cash flow, it could serve as a valuable learning experience and a foundation for future investments.

Remember, successful real estate investing isn't about following a one-size-fits-all approach. It's about finding the right property in the right location that meets your specific financial goals and risk tolerance. Focus on positive cash flow, high-quality neighborhoods, and properties you can effectively manage given your current situation and experience level.

Dale K Poyser · Answer

@Ashley Guerra I think @Andrew Kiel makes some great points. Based on what you are saying I think a SFH might be your best bet. I would be curious to see how your numbers would look if you got a 3/2 and househacked (roommates) or continued to live with your parents while you turned that place into a MTR.

I think starting out, you should def do what works for you. Buy places in nice areas because those also tend to weather downturns better.

should i start with a SFH or MFH in central jersey?

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