Thoughts on Changing Strategy from Duplex to SFR

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Thoughts on Changing Strategy from Duplex to SFR

Robert McCormick
Homeowner · Sussex County, NJ · Member since 2019 · 29 posts · 14 votes

So I'm not planning on throwing out my goal, but hear me out...

My original plan has been to buy a duplex within a year and house hack it to live in one unit and rent out the other unit. However, after looking for multifamily properties in surrounding areas on listing websites (such as Zillow) I have found that any duplex I find is either a) nowhere near where I work (+1 hour commute time) b) seems to need A LOT of renovation work or c) is out of my price range that I can afford. There are few that do meet my criteria, but they're typically found in rougher neighborhoods I would want to avoid. 

As a result, I have been considering if it may be a better idea to pursue a Single Family Residence in place of a duplex, and potentially house hack rooms out of that? [It is worth noting that I currently live in Morris County, NJ in the NYC Metro Area so prices are relatively steep and I am planning on qualifying for a mortgage alone. Also I've heard landlord laws in NJ aren't as friendly as other states, so I'm not sure how plausible house hacking a SFR is.]

I'm not throwing away my goal of buying a duplex just yet, but I am curious about exploring my options and potentially pivoting my goals if it makes sense. I would value any feedback anyone is willing to give.

What would you do?

-Rob

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Patrick Pierre
New to Real Estate · Garden Grove, CA · Member since 2020 · 64 posts · 56 votes
6y

I definitely hear you, Robert. I'm debating the same thing as you. If you really don't want to find someplace that's too far, have you considered possibly getting a partner for a Triplex? Or try to increase what you qualify for by saving up for a bigger downpayment and increasing your income?

I think if you really want the Duplex you should figure out a way to make it work. You might have to make the sacrifice of that 1hr commute.

But ultimately, if you don't mind having roommates than SFR might be the way to go. But me personally, I can't do roommates so that's why I'm sticking to my Duplex plan.

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  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    You have to do what works for you.  Nothing wrong with renting out rooms if you are willing to do that.  House hacking doesn't have to be in a multi family property although if you can find one in a decent area that works for you it would be preferred.

    Best of luck!

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  • Patrick Pierre
    New to Real Estate · Garden Grove, CA · Member since 2020 · 64 posts · 56 votes
    6y

    I definitely hear you, Robert. I'm debating the same thing as you. If you really don't want to find someplace that's too far, have you considered possibly getting a partner for a Triplex? Or try to increase what you qualify for by saving up for a bigger downpayment and increasing your income?

    I think if you really want the Duplex you should figure out a way to make it work. You might have to make the sacrifice of that 1hr commute.

    But ultimately, if you don't mind having roommates than SFR might be the way to go. But me personally, I can't do roommates so that's why I'm sticking to my Duplex plan.

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  • Ted Felsberg
    Member since 2018 · 18 posts · 8 votes
    6y

    Hey!
    So I am very new to investing, so my advice doesn't have a lot of weight to it. But from listening to other investors it sounds normal to go through 100 deals to find a good one. And I've also heard that using the mls doesn't get the best results. When I am ready to, I plan on driving for dollars and using yellow letters sent to absentee owners. 
    But if you really want to abandon the duplex idea for single family, that could work too. Rent some rooms out and collect that money!
    You got this dude!

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  • David Thomas
    Real Estate Agent · Cranford, NJ · Member since 2011 · 149 posts · 54 votes
    6y

    @Robert McCormick As you search for single family homes in Northern NJ you'll find the same challenges as looking for a duplex: high prices (and climbing higher even during the pandemic right now), extremely low inventory, or major work needed. Also, to find a single family with an ideal layout that allows for room sharing in a comfortable manner will be even more challenging in my experience. Do you want separate baths? How about kitchen sharing? Separate entrances? Prefer the rooms on a different floor? It will be a tough process unless you are okay with roommates. That's basically what it sounds like if you are seeking to house hack a SFR and room share. Otherwise, with this current market of very low inventory of all home types, you'll either need alot of patience and an extended timeframe to buy, or look to expand further in geography. This would include higher cap rate or class C properties/neighborhoods that are not on your radar. Ideally you should be working with an experienced investor friendly agent or reputable wholesaler (tough to come by but out there) to help you search and navigate through this.

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  • Robert McCormick
    OP
    Homeowner · Sussex County, NJ · Member since 2019 · 29 posts · 14 votes
    6y

    @Twana Rasoul I agree, every situation is different and it really depends on one's comfort level. Thanks for the feedback!

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  • Robert McCormick
    OP
    Homeowner · Sussex County, NJ · Member since 2019 · 29 posts · 14 votes
    6y

    @Patrick Pierre I haven't really dived too deep into looking for a partner, but it's definitely worth considering. Also, saving up for a bigger down payment/increasing my income could also be a potential route, I would just be hesitant how far off my timeline that would push me.

    You drive a fair point, making the sacrifice to extend my commute could potentially be worth it in the long haul and I would only really need to do that for at least a year or two.

    Thanks for your thoughts and good luck with the duplex in CA!

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  • Robert McCormick
    OP
    Homeowner · Sussex County, NJ · Member since 2019 · 29 posts · 14 votes
    6y

    @Ted Felsberg Hey Ted, I appreciate the advice nonetheless. It's always good to hear multiple opinions.

    I think going for off market deals can definitely be rewarding and can be a useful tactic. I'll keep that in mind, if I find my searches aren't generating what I'm looking for.

    Thanks for the encouragement and best of luck!

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  • Robert McCormick
    OP
    Homeowner · Sussex County, NJ · Member since 2019 · 29 posts · 14 votes
    6y

    @David Thomas You raise a good point that searching for a single family home will likely have the same challenges as looking for a duplex would. To that point, you've also brought up things I haven't even considered regarding, separate baths, kitchen sharing, and overall interaction with a potential stranger who would be my tenant. I wouldn't mind roommates at this stage of my life right now, but I know I would probably prefer a separate living space if given the choice.

    As it stands today, I'll have about x amount of dollars saved up by June/July of 2021, so my timeline to purchase can be flexible anytime after that date. I could also consider expanding which types of properties/neighborhoods I'm looking at if they look like they are in areas which could potentially appreciate and where I can add value through forced equity as well. I'm definitely shooting for working with an investor friendly agent with experience though which could add a lot value and fill in my knowledge gaps.

    I appreciate the input David, you provided some quality insight that was very helpful.

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  • Joanne Eriaku
    Realtor · NY · Member since 2020 · 167 posts · 169 votes
    6y

    @Robert McCormick, @Jonathan Greene, may have some wisdom to share

    1Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    6y

    Thanks @Joanne Eriaku.

    @Robert McCormick what you are trying to do right now is force the issue. Too many first-time investors decide they want to invest and then make a way to do it, even if it doesn't make sense. There are plenty of deals, but as you said, they aren't in your price range. That means multis around here are hot and if you want the ones priced well, you need to do some work. You can still find one by being creative in what you are looking for. If you find a two-family that isn't in great shape, but one unit is rented already and the other is open, you can do the work on your unit and leave the other one until they leave. Or you can look for a two-family with a boarder unit (basement or attic) and live there as the owner and rent the other two. A SF house hack sounds good in theory, but as others pointed out it's not great for livability. Sharing kitchen, not separate bathrooms, enforcing house rules for others, etc.

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  • Robert McCormick
    OP
    Homeowner · Sussex County, NJ · Member since 2019 · 29 posts · 14 votes
    6y

    @Jonathan Greene Thanks for the feedback Jonathan. I can see how this is a common mistake for new investors, such as myself. While I'm definitely eager to get started, I do want to be sure that I have the knowledge and funds in place before I take that leap. I also want to be conscious that I'll need to be patient and need to find a deal that actually makes sense.

    The more I learn, the more I'm realizing how important it is to improve the property at some capacity, if I want it to appreciate overtime. I've heard of people fixing up the unit they live in, while renting out the other and then improving the 2nd unit once the tenant moves out. That seems like a smart route to take. I've never even considered a two-family with a boarder unit, and the idea of renting out both units while still living in the property sounds intriguing and is something I definitely would look into. Thanks for the input, I appreciate your comments!

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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    6y

    @Robert McCormick sometimes you have to finesse the boarder unit thing and close with it vacant. But then as the owner you move in, add a kitchen of sorts, and then if you want to sell later you just remove it. Let me know if you have any other questions.

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  • Robert McCormick
    OP
    Homeowner · Sussex County, NJ · Member since 2019 · 29 posts · 14 votes
    6y

    @Jonathan Greene Hi Jonathan, Alternatively to my original post above, where I could house hack a single family residence and rent out the rooms...Would it make more sense to buy a SFR, live in it myself for a year, then move it out and rent it out fully to a family at full price once I reside somewhere else? Or does my ability to qualify for a mortgage for this type of situation decrease significantly while also increasing competition with other homebuyers?

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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    6y

    @Robert McCormick that is a strategy that I promote all the time. Many of my best deals have all been single-family homes that I've lived in for some period of time. If you buy smart, live and learn to renovate a little for a year, then rent it for a year, you just got mini-flip experience and then landlord experience with most likely appreciating value. You can refi or BRRRR out of it after a year if you buy well.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
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