New Jersey Beginner Investor

7 Replies

Hello Everyone!

I recently graduated from Montclair State University as a Business major, and have to decided on real estate as my vehicle for accumulating passive income. The thought of seeing an actual physical property as a form of investment rather than dumping money into stocks is very exciting to me. I'm still living with my parents at the moment so my interest currently lies in renting out small multifamily properties and using an FHA loan to both move into a property, and rent out its other units. I'd be very grateful for any advice or tips from other NJ investors. Please don't hesitate to contact me! :)

@Alex Carestia , you're definitely on the right track. In my opinion, house hacking a 3- or 4-unit property using FHA 3.5%-down financing is in my opinion the best option for a young person looking to get started investing in real estate. It frees up so much cash to invest elsewhere. It's really a no-brainer if you're throwing away money every month making somebody else rich.

One thing to keep in mind when looking for an FHA owner-occupied triplex or fourplex is that 85% (75% in certain states) of the market rents on all the units need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies. There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search.

Good luck and reach out to me with any questions!

Hey @Alex Carestia I am pretty much in the same boat as you.  I just recently graduated from college and am currently living in Bergen County NJ.  I am also leaning towards investing in a multifamily home in northern NJ. I am also looking for tips from some experienced investors in northern/ central NJ.

@Logan Allec Thanks for the spreadsheet.  I have been trying to create something like this for myself to analyze certain deals.  This is very helpful! 

@Alex Carestia

I agree with others, you are on the right track to start with the FHA, don't let anyone back you down on the fact that FHA loan is expensive and you pay upfront fees and monthly PMI's, it's definitely the right thing to do.

You have questions then come to BP and search the forums for answers or start a discussion and you will get some great advice. 

Make sure you ask a lot of questions to your lender when it comes to FHA financing, in my view eyeing a property is one thing and raising capital or financing that house is another, they both are two different battles to be fought before you close on the house.

Good Luck to you. 

Cheers, 

Kunal M.

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