House hacking with a family of 5 in NYC?

Question

Hi I am just starting this magic world of rental property investing and I am super fascinated by house hacking.

However, I am wondering if I have any chances to house hack (or use similar strategies) in New York City with a family of 5. We currently live in downtown Manhattan in an apartment subsidized by my employer. There is no way I could afford anything similar in this area if it was not subsidized. As things stand now we are spending in the ballpark of ~4k every month which feels totally wasted (this is the amount I could put towards a mortgage also).

However, if we were to target areas we can afford we would have to completely change our lifestyle (as far as I understand from checking house prices in Manhattan). We also have lots of friends in the neighborhood. So I am left with the dilemma: should I completely change my family's lifestyle or give up the idea of making a smart investment with our house? Or is there actually a way to make a smart investment in a very expensive area like the one we live in?

For instance, while moving to a completely different area would have a huge impact on our life, we would not mind leaving in less space (we are in a 3 bedrooms now).

Thanks!

Alex Furini · Answer

Enrico,

As someone who has househacked in Brooklyn, I can say that househacking is an amazing way to invest. That being said as @Ali Boone has explained, like all good real estate deals, the numbers must work first. If the numbers don't work, you can be in a world of hurt. I would add a second point that even when the numbers work, you need to be prepared for not only a location change, but an interesting living situation for a certain period of time.

When you get down to the basics, househacking is essentially living in a construction site for a indeterminate amount of time. I didn't mind it and thank god my wife didn't either.(no kids) I do remember many times wondering, how I could have done this with kids around. You would have to be very diligent with your work and organization. I don't know about others, but when I do construction, I leave tools and debris everywhere. Think sharp objects and debris everywhere on top of drywall dust covering everything you own. In no way am I trying to deter anyone from househacking, I think its amazing. Just make sure with kids you create a safe space for your family outside the "construction zone"(can be easier said than done).

Good luck with your project. PM me if you need assistance.

Andrew C. · Answer

Nope a fully renovated move in ready 2 family in BK that cash flows definitely does not exist.  However, back to Enrico's question about the numbers...what would you define as cash flowing for a house hack?  You can use calculators in BP when a property is purely an investment property.  But for a house hack, there is the primary residence portion.  I own a co-op and if I were to hypothetically rent it out (I'm not allowed to), it wouldn't cash flow either.

Alex Furini · Answer

@Andrew C. You are totally right, which is exactly what Ive done in the past. Unfortunately if you buy a 2 family house in Brooklyn that actually ends up being a good deal based upon the numbers(per #1), 99% of the time its going to be a fixer upper. Thus the construction work putting in the sweat equity to increase rents, property values etc. If you can find fully renovated move in ready 2 family in Brooklyn that cash flows please PM me with your real estate agent. Id love to talk to them.

Jason Lee · Answer

How old are your kids? If they're school aged, or approaching, where they go to school is probably going to be one of the determining factors. Everything else will probably have to be backed out from there.

Enrico Bertini · Answer

Yeah I will definitely start with checking the numbers.

My idea was indeed about buying a duplex, rather than buying a fixer upper.

I have a couple of basic questions (I am a total beginner):

1) What are the best resources to learn how to look for an understand the numbers?

2) How do I understand what are possible area in NYC that could be viable candidates?

I have been browsing through Trulia and Zillow but I am not sure whether these are good site and exactly what should I look for there.

I hope you won't mind for my very basic questions! I am here to learn as much as I can.

Thanks!

Andrew C. · Answer

@Alex Furini I may be mistaken but that's not my understanding of what househacking necessarily means.  It could be buying a duplex/triplex, living in one unit and renting the others out or buying a house and renting one of the rooms out.  However, with the prices in NYC, it would make more sense to buy a fixer upper which would likely mean you'd be living in a construction zone for awhile.

I agree with Ali that you have to run your numbers.  To find a property that makes sense, you might have a much longer commute to work since you live and I assume work in downtown Manhattan currently.

Enrico Bertini · Answer

Thanks so much Ali, this is actually very useful. I does seem to confirm I may not be able to make major changes unless the numbers add up. I am going to read the articles you linked ... Thanks!

Ali Boone · Answer

My first response would be-- only do that if the numbers are that worth it! Just because you househack doesn't necessarily mean you'll be profiting. So unless you just want to change your lifestyle (doesn't sound like you really want to), I'd make sure you're doing it for some significant returns to justify the change.

Here's some general considerations for househacking-

https://www.biggerpockets.com/renewsblog/considera...

Househacking can be great, but like I said, it's not a guaranteed profit. So definitely do some research and see where you'd be at in terms of profit before you make any crazy moves.

As an extra layer of research, it's all about comparing numbers. You may be spending $4k now in rent, but how much would you be paying in mortgage interest alone on that househack? It could be more than $4k per month, and if just the mortgage interest alone doesn't put you over the $4k, property taxes and insurance and general expenses may. So then technically you'd be wasting more than $4k by buying something. Not sure if that would be the case or not, but it'd be worth finding out.

This one isn't totally answering your question, but same general idea for considerations-

https://www.biggerpockets.com/renewsblog/2014/01/1...

Hope those help!

House hacking with a family of 5 in NYC?

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