All Forum Posts by: Ro Maga

Rick M. Personal preferences aside, the value of “hacking up” a building into condos depends on your market. I don’t know how things are in NH, but in certain parts of Jersey City — those in close proximity to trains to Manhattan — the difference between a 4 unit rental and 4 units that could be sold individually can be several hundreds of dollars. I’m glad to see contacts are being given.

I think it’s important that you follow the advice of people (developers and brokers) familiar with the market and building regulations in Jersey City. If the property is in one of the hotter neighborhoods, a 4-family would be well over a million dollars, and if you can turn the units into condos, you can double that. I don’t have any contacts for you, but if I were in your place and got nothing from the forums, I would walk around the neighborhood looking for a project similar in size and scope to the one you would design for your property. You often see signs with the architect or developer’s firm posted on the fence.

Well, you don’t do a 203k loan because they’re the easiest way to finance and repair a home. You do them because you don’t have another way (or a more affordable/manageable way) to finance repairs on a property that would otherwise not be eligible for financing in the first place. We did a 203k in 2016, and our experience was relatively good, but it was by no means seamless. So how nerve racking you find the process will depend on your expectations and tolerance levels. Just to give you an idea, we closed in early June, were given a 6-7 week renovation period, but we didn’t get to move in until the end of October. This could’ve been a financial disaster for us, except for the fact that we were financially and otherwise prepared for the work to start and end much later than anticipated. This was a life saver given that we ended up paying for two mortgage simultaneously for 6 months. The quality of work of your renovation will depend on the quality of the people you choose to work with; and your degree of frustration will highly correlate to everyone’s level of experience working within the parameters of the loan’s requirements. Your GC should be a season 203k contractor. As you know, good work is seldom cheap or fast. Add lots of red tape that the 203k loan imposes on your GC, and cheap and fast are for sure not what you get. So there’s a premium that you will pay for getting renovations done with borrowed money with lots of regulations. Buy hey, you’re only putting 3.5% down, right? So assume you’ll need to have some hefty reserves. Also, in addition to your 6 months PITI reserves (which you will probably use), you may want to have some extra funds to cover renovations or repairs not in the original estimate. Although the 203k factors in a contingency fund, you will almost without a doubt end up wanting or having to do unforeseen repairs. Lastly, a $300k renovation is a pretty sizeable project. Since the 203k is an FHA loan, would it not follow the financing limits of all FHA loans? I believe the maximum financing for high cost areas for 2018 is just under $680K. So that would have to cover both the house and the repairs. That’s a lot of debt for a SFH.

I would asume $10k in repairs for something that’s very close to turnkey. Currently in Newark, any property going for less than 300k is going to need a lot more in repairs than $10k. Even in the roughest of neighborhoods ( or perhaps, especially in the roughest of neighborhoods). An other question is: is the investment worth it? I really think that Newark will continue to have strong appreciation particularly around the train stations and its better wards (East, and lot of the Central and the North). Competition here is strong, particularly from cash buyers. If you manage to find an ok multi family in an ok area for a reasonable price, you won’t go wrong. Now if Amazon comes here... we’ll, just imagine.

Well, for starters, your lender will want to see 6 months of PITI (principal, interest, tax & insurance) in reserves beyond your down payment and closing costs. They’ll consider any investments that can be accessed quickly, like a Roth IRA, but if you are looking for a number, that’s one we’ve aimed for. Provided you get a good tenant relatively quick and that you do good due diligence to minimize too many surprises (which will most likely happen), those reserves should cover you.

What a great way to close the year! The building looks great and those numbers are not bad at all. Your rehab budget seems pretty small for 8 units. What are your plans? Paint and vinyl for sure. But bathrooms and kitchens?

I have no experience with the VA loan, but the 203k is worth it but to say that the process is difficult, slow, and frustrating at times (a lot of the times) is an understatement. Was it worth all the hassle, and the multiple delays, and the ton of red tape? Yes. You probably want to meet with a lender and get preapproved for a 203k and start looking. NJ is a very competitive market as you know, and anything with a potential upside in a good location will receive tons of offers, including a few cash offers within a few hours of being listed. Also, if you go the 203k route, keep in mind you will be forced to use a contractor for anything with 2 units or more. You can do side repairs on your own but not with loan funds.

It sounds like you’re house-poor. Why hang on to a house that has you on the brink of financial chaos? I know, there’s lots of emotion attached to first homes, but that will keep you poor. If there’s any equity on the house, do what Johnathan Boyle recommends. You’ll be in a better financial position with a nice down payment to househack in a multi family. Buying a MF is a competitive thing, so a good down payment and funds to make your offer more competitive (like asking for no seller contingencies or having a conventional loan) will go a long way towards getting you into a living situation where you may have some breathing room.

Well, it seems that you are positioned to re-start with a clean slate at least. If I were you, I’d thank the gods the early departure of the unscreened, problematic roommate and lust that bedroom with Airbnb. Since you’re already hosting, extending that to your unit can’t be that much more work, and you’re bound to get what you were collecting from the roommate in a fraction of the month. I just wouldn’t offer ate longer than 3 weeks to avoid problems. I would also give 30-days notice to the junkie tenants and be firm. (Again, thank god you only have a month-to-month contract with them). Get them out! That’s a bomb waiting to explode and the longer you wait the more difficult, dramatic, and expensive that situation will become. I hope you’re given yourself enough margin to allow yourself a couple of months of vacancy. In any case, it’s just a matter of time before they stop paying rent. You’re seeing a ton of red flags, so take action ASAP or live with the terrible outcomes this is sure to provide.

You asked “how feasible” house hacking was in some of North Jersey’s hottest markets so your monthly housing expenses would be zero out of pocket while only putting 3.5% down. Oh, and you want to avoid the less desirable neighborhoods while you’re at it. Wouldn’t that be nice? Everyone of these folks who know these North Jerseys markets is telling you that what you are asking is not feasible unless you change at least one of your variables and by a lot. That is, you would either have to bring a HUGE down payment to the table, resign yourself to pay your monthly share of expenses, find an amazing off market deal (which may require an all cash offer depending on the state of the property) or you look in the far-from-desirable neighborhoods/towns to make that work. It seems to me you have a couple of options here. You either take their advice, adjust your plan, and take action; or you could figure this out on your own by crunching the number a few hundred times and spend the next couple of years waiting for a unicorn or a radical change in the market (which does happen from time to time). It may help to keep in mind that the first house purchase you make is unlikely to be your last.