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.

David Czech · Answer

Hey Ashley,

Also in Central Jersey and have been investing for a number of years now. For starters, are you sure that you would be able get a 5% rate as a first time home buyer? Not 100% sure about that but double check.

Few things to consider: It's a tough market now with interest rates, especially here. Any MFH you buy for around the 500-700 range in Central Jersey in a better town will most likely require a lot of work, so you have to take that into consideration. Most likely won't be breaking even.

Even if you do fix something up, you can't force appreciation to the degree that we've seen in the past 2-3 years. You have to be willing to play the long game and overpay with the intent that eventually after renovations you will take maximum market rent and turn a profit. A lot of this is dependent on where rates go in the next 6-12 months.

As far as your SFH strategy goes, not sure what the job market is like in South Jersey, but I know in Central Jersey there are a lot of NY commuters, so renting will always be easier. Try to look for deals, play the long game, but if the number's don't add up don't feel compelled to do anything now because you'll just feel maximum pain a year out after purchasing.

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

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