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House Hacking

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Shane Insang
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My Revamped House Hack Strategy

Shane Insang
Posted Mar 3 2024, 21:15

Hey Guys. I need to change my house hacking strategy in the Bronx. Originally I was hoping buy a 2-4 multifamily property and rent out the other units. I would not be able to afford an FHA loan on such property in the Bronx. My other alternative would be to save several years for a down payment. I don't want to go with either of these options and have been considering other strategies to finally invest in real estate.

I think a strategy that would serve me well is one where I buy a 2 (or 3) bedroom house with 1.5+ bathrooms. It would be a house where I could afford the monthly payment without renting by the room. I would rent the extra room(s) similarly to a medium term rental property. This would give me income and give me an example of renting by the room if I decide to do it in the future. I would use an FHA loan with 3.5% down and I would move refinance and move out (to rent the entire house) when I am ready to look for another investment property.


Thats the general plan. I have other considerations like quality of the house at purchase, neighborhood, renting room specifics etc. I was hoping yall could critique my plan. Maybe be give me more things to consider and whatnot. Thanks :)

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Wale Lawal
  • Real Estate Broker
  • Houston | Dallas | Austin, TX
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Wale Lawal
  • Real Estate Broker
  • Houston | Dallas | Austin, TX
Replied Mar 4 2024, 05:20

@Shane Insang

Your house hacking strategy in the Bronx sounds like a thoughtful approach, and it's great that you're exploring creative options to get started in real estate. Here are some considerations and additional things to think about:

To ascertain the level of demand in the Bronx for medium-term rentals, do in-depth market research. Seek out neighborhoods where demand is steady or increasing, and take into account elements like conveniences, safety, and the closeness to public transit.

Pick a home that fits in with your long-term objectives. Think on things like the property's quality, prospective value, and desirability to tenants.

Making use of an FHA loan with a small down payment is a wise choice. Make sure you've looked into all of the financing alternatives that are out there and that you know exactly how much each will cost.

Especially if you intend to rent out individual rooms, create a comprehensive management strategy for the property. Consider using tools or software for property management that can help to automate the procedure.

In the Bronx, become familiar with the zoning and leasing restrictions. Renting out rooms in a single-family house may be subject to special regulations in some places.

Have a well-defined plan in place for room rentals. Take into account the duration of leases, the procedures for screening prospective renters, and the home regulations in order to guarantee a peaceful living space.

It's critical to have a well-defined departure strategy. Recognize the state of the market that might influence your decision to refinance and relocate. This can have to do with reaching a particular equity threshold, real estate growth, or deadline.

Markets for real estate may be very volatile. As you advance, keep up with changes in rules, funding choices, and market trends in order to make wise selections.

Real estate markets can be dynamic. Stay informed about market trends, financing options, and changes in regulations to make informed decisions as you progress.

Remember, every real estate investment strategy has its own set of challenges and opportunities. Adapting and refining your plan based on experience and changing market conditions is a key aspect of successful real estate investing. 

Good luck with your house hacking journey!

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Mohammed Rahman
  • Real Estate Broker
  • New York, NY
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Mohammed Rahman
  • Real Estate Broker
  • New York, NY
Replied Mar 4 2024, 12:40

Hey @Shane Insang - I'm a broker and investor in NYC, I've also used the househacking strategy with an FHA loan.

What you're describing is a pretty solid strategy, and a good way to get your foot in the door. You'll have an advantage as when you're buying a single family home, you could look for ways to maximize your value by purchasing a house that has a finished basement.

More often than not, my clients that have been in your shoes have ended up living in the basement while renting out the rest of house as a full home.

Not saying this is what will work for you, but just my $0.02 on what to look for... give me a shout via DM or text me at the number in my signature. Happy to help point you in the right direction and ultimately represent you as your broker. 

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Vitaliy Volpov
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  • Investor
  • Albany, NY
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Vitaliy Volpov
Pro Member
  • Investor
  • Albany, NY
Replied Mar 4 2024, 13:53

Hey Shane,

As the saying goes "when life gives you lemons, you should make lemonade."  It sounds like you are trying to make the most of what is available in the Bronx.  I am personally not a fan of single family house hacks, but if that's all you got available in the area where you want to be and at the price point you can afford, then you have to go with that.  Others on this thread can give you advice on how to make that work.  My only contribution as possible food for thought for you is to ask whether you have the ability to move to a less expensive area and house hack there?  I live and invest in the Albany, NY area.  The price-to-rent ratios are WAY more reasonable here than they are in the City.  We work with a ton of NYC investors who come Upstate to invest where their money goes much futher.  With that said, for house hacking, you would obvioulsy need to physically relocate if you were to go this route (whether to Albany or any other similar area).  Would your job allow a move like that?  If not, are you able to find a comparable job in a less-expensive market?  Even so, are there are other considerations like family or significant other that prevent you from considering a move like this?  Those are the questions, I would ask.  

Hope this helps!  Happy to connect and discuss further if you would like.  Good luck!

Vitaliy

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Davendra Bhagwandin
  • Real Estate Broker
  • New York City
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Davendra Bhagwandin
  • Real Estate Broker
  • New York City
Replied Mar 4 2024, 18:03

Hey @Shane Insang I'm a Bronx based Broker, Resident and Lic.Expeditor here in NYC
and can offer some insight into your plan if you'd like in terms of rent room specifics. 

Financials and strategy aside which I'm sure you've got down, It's important to look at the external risk factors when renting out ANY  property as an SRO Single Room Occupancy in NYC. As the department of buildings has very strict codes of use. You also run the risk of voiding your homeowners insurance. The following is an expert from an article on Brick Underground that explains it really well.

Can I rent out bedrooms in my NYC townhouse to help pay my mortgage?


"New York City allows members of the public to have roommates in both single-family homes and in apartments, provided that these roommates maintain what is known as a 'common household,' meaning they share the livable space of the dwelling unit,"

Under the NYC Administrative Code, no more than three unrelated roommates can occupy a dwelling unit and maintain a common household, which means you can take on one or two roommates.

But you can't rent out single rooms. "It is not legal to divide an existing dwelling unit into separated living spaces, thereby creating new dwelling units, without first obtaining DOB work permits,"  That would be an illegal conversion and can result in violations and other enforcement actions.

"If someone were to rent out part of an existing dwelling unit in a way where members have limited rights to use the common spaces and don’t have access to the other rooms—for example using external locks to separate the home into different areas—that would constitute an illegal conversion,...

You will also need to update your insurance policy.

"You can void your insurance by renting out rooms, especially on a short-term basis,"
____________________________________________________________________________

This doesn't even cover the type of violations you'd get slapped with (if reported of course) and what it would take to get them clear. 

So as a licensed Broker, and Expeditor with experience in dealing with investments/investors, distressed homes, and multifamily violations here in NYC I can tell you that your plan is pretty sound but the fine details of how it is executed (types of locks you use, how it is divided etc) matter here in NYC. Because housing court and violation resolutions is a daunting process.

Feel free to send me a message any time with any specific questions or such or any questions about residential 1-4 fams in NYC I'll do my best to answer what I can. 

Best of luck on your investment journey, hope you knock it out of the park soon