Househacking multifamily for Newbie in New Jersey

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Househacking multifamily for Newbie in New Jersey

Betty Xin
Member since 2020 · 6 posts · 1 vote

Hello! 

My name is Betty and I’m a brand new aspiring real estate investor. I’m so thankful to have found the BP community. Nice to meet you all!

My boyfriend and I have been looking to settle down and purchase a home. At the same time, we hope to get started in real estate investing.

After listening to various BP podcasts and doing some research, it seems like our most viable option is to house hack a multifamily (duplex/triplex). We hope to have the privacy of our own homes while renting out the other units.

We moved to New Jersey recently, and are currently living in Union township. We are very new to New Jersey and real estate market. Are there any guidance or advice you could share with us in terms of:

1. Are there any preferable areas for multifamily investing in NJ? We are currently looking at any location that’s close to transportation to NYC since one of us work in the city and thought this could attract high-quality tenants (eg. white collars working in NYC).

2. If you house hack or invest in multifamily, what is the demographic of your tenants? We are having a hard time defining what type of tenants would be most inclined to rent in a multifamily.

3. Based on my research thus far, most multifamily properties are old and run-down. Does most multi-family require a lot of up-front rehab? 

4. If you own a multi-family, what are the long-term appreciation of this type of property? Does it appreciate at a slower pace relative to a single-family?

Lastly, is there a real estate agent you recommend? We currently do not have an agent and really hope to find an experienced agent to work with. 

If there’s any advice or resources you could share, that’s much appreciated!!

Thank you so much for your kind guidance!

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Max Vishnev
Real Estate Agent · Bayonne · Member since 2019 · 52 posts · 80 votes
6y

Hi Betty, welcome to BP!  As a NJ house-hacker and real estate agent, I would love to help you.  We bought a 2-family in Bayonne last year (check out my blog post on house-hacking) and found great tenants within a week of me listing the rental unit (after we finished renovations).  There are lots of people getting priced out of more expensive neighboring areas looking to rent in parts of Hudson County with a relatively short commute to NYC at a lower cost than Brooklyn, parts of Queens, Downtown Jersey City, etc.  That's part of the reason Bayonne has been booming.  You can still rent a nice 1-bedroom for $1400 or a 2-bed for $1600 (on average).  The kinds of tenants you can attract will be driven by many factors, but the most important, I think, are:

- Condition of the unit (is it old and beat up or renovated?) and amenities provided (i.e. washer/dryer, dishwasher, central air, etc.

- Proximity to public transportation to NYC.

- Block and neighborhood safety and amenities (can they walk to a grocery store, for example).

I don't think you have to limit yourself to "white collar".  You can find some terrific tenants in the healthcare industry, as well as respectable "working class" professionals.  For example, wouldn't it be great to have a tenant who is a licensed plumber or electrician?

Now, as to your other question as far as agents, here is my subjective opinion as an agent:  Make sure you choose an agent that is also an investor (whether house-hacking or owns pure investment properties).  You want an agent on your side that understands the investment side of it.  Secondly, you want an agent that actually wants to help you as a first-time home-buyer.  Some of the "top" agents (i.e. most sales) focus solely or mostly on sellers (aka. listings), so they will simply pass on onto someone else on their team that works with buyers.  Lastly, a great agent will put your interest first, ahead of any possible transaction, and connect you with great professionals to help you with the purchase process (lender, lawyer, inspector, contractors, etc).

The questions you should figure out before starting the search:

- What is your budget?

- Would you rather buy something already renovated or mostly renovated and lose out on most if not all of the "value-add" but not have to deal with permits, contractors, and the cash outlays and stress involved with rehabs, or would you rather buy something that needs work and "make it yours" and deal with renovations?

Happy to chat offline, if you're interested.  Feel free to PM me.

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  • Allan Szlafrok
    Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes
    6y

    There are great areas in Hudson County like Jersey City that have easy access to NYC (think 20-30 min) and a lot of properties there are great for house hacking. I own a few small multi families there and i did a ton of rehab on them which added a lot of value. Reahb is where you are going to get the majority of your upside from. There was a ton of appreciation there from 2010-2019 but its slowed down a bit as it has for most of the country. I would say multis have increased more than singles because a lot of people are into house hacking now. All of my properties are walking distance from the light rail making it a quick ride into the city. Id start looking there if i were you.

    0Reply
  • Betty Xin
    OP
    Member since 2020 · 6 posts · 1 vote
    6y

    @Allan Szlafrok Thank you so much for your tips. I'll definitely look into Hudson County. In terms of rehab, I'm not at all familiar with rehab. Is there any resource you recommend? How long does your rehabs normally take? My lease is up in September so I'm hoping to find a good property plus rehab in between now and then, and move in around September. 

    Do you have a real estate agent you recommend? 

    Again, thank you so much!

    0Reply
  • Allan Szlafrok
    Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes
    6y

    Rehab can take a while especially if you need to pull permits and deal with the utility companies which you likely will. 9 months isnt crazy if you need to do that stuff. Definitly find a contractor to give you a rough idea of rehab costs.If i were you id select an area first and see whos got the most listings in the area and contact them. Zillow is a good way to do that research.

    0Reply
  • Max Vishnev
    Real Estate Agent · Bayonne · Member since 2019 · 52 posts · 80 votes
    6y

    Hi Betty, welcome to BP!  As a NJ house-hacker and real estate agent, I would love to help you.  We bought a 2-family in Bayonne last year (check out my blog post on house-hacking) and found great tenants within a week of me listing the rental unit (after we finished renovations).  There are lots of people getting priced out of more expensive neighboring areas looking to rent in parts of Hudson County with a relatively short commute to NYC at a lower cost than Brooklyn, parts of Queens, Downtown Jersey City, etc.  That's part of the reason Bayonne has been booming.  You can still rent a nice 1-bedroom for $1400 or a 2-bed for $1600 (on average).  The kinds of tenants you can attract will be driven by many factors, but the most important, I think, are:

    - Condition of the unit (is it old and beat up or renovated?) and amenities provided (i.e. washer/dryer, dishwasher, central air, etc.

    - Proximity to public transportation to NYC.

    - Block and neighborhood safety and amenities (can they walk to a grocery store, for example).

    I don't think you have to limit yourself to "white collar".  You can find some terrific tenants in the healthcare industry, as well as respectable "working class" professionals.  For example, wouldn't it be great to have a tenant who is a licensed plumber or electrician?

    Now, as to your other question as far as agents, here is my subjective opinion as an agent:  Make sure you choose an agent that is also an investor (whether house-hacking or owns pure investment properties).  You want an agent on your side that understands the investment side of it.  Secondly, you want an agent that actually wants to help you as a first-time home-buyer.  Some of the "top" agents (i.e. most sales) focus solely or mostly on sellers (aka. listings), so they will simply pass on onto someone else on their team that works with buyers.  Lastly, a great agent will put your interest first, ahead of any possible transaction, and connect you with great professionals to help you with the purchase process (lender, lawyer, inspector, contractors, etc).

    The questions you should figure out before starting the search:

    - What is your budget?

    - Would you rather buy something already renovated or mostly renovated and lose out on most if not all of the "value-add" but not have to deal with permits, contractors, and the cash outlays and stress involved with rehabs, or would you rather buy something that needs work and "make it yours" and deal with renovations?

    Happy to chat offline, if you're interested.  Feel free to PM me.

    5Reply
  • Chace Fraser
    Realtor · Portland, OR · Member since 2017 · 357 posts · 259 votes
    6y

    @Betty Xin @Max Vishnev just dropped some amazing advice on you, and he's in your area, and he's a house hacker, AND HE'S AN AGENT! If I were you I'd take him out to lunch and find out how he can help you along your journey. You said your lease is up in September. Believe it or not, that's not too far away. The process of getting pre-qualified, finding a property, closing on a property, and doing any repairs can take longer than a lot of people think. I recommend getting the ball rolling as soon as possible.

    2Reply
  • Max Vishnev
    Real Estate Agent · Bayonne · Member since 2019 · 52 posts · 80 votes
    6y

    @Chace Fraser I appreciate the kind words, Chace!  And good call on the timeline.  You're right, between getting pre-approved to starting the search, viewing many properties, making offers, getting offers rejected, finally getting one accepted, then having it fall through (after the inspection, for example), then going back to looking at properties, finally getting an offer to stick and taking it to closing (which could take 45 days or longer), then doing the rehab -- it could take a while!  It doesn't hurt to start early.  The early bird eats the worm, right?

    0Reply
  • Nolan B.
    Member since 2018 · 8 posts · 2 votes
    6y

    Hey @Max Vishnev, how is your house hack going? Does the rental income from your tenants cover your mortgage, or do you still pay the difference? 

    0Reply
  • Max Vishnev
    Real Estate Agent · Bayonne · Member since 2019 · 52 posts · 80 votes
    6y

    Hi Nolan, my rental income is $1400/m.  My principal and interest payment is around $2200/m (not to mention taxes and insurance).  However, given that I'm a short commute away from Manhattan (Bayonne, NJ), I can't imagine a house-hack situation that completely covers my mortgage.  It would have to be a "rent by the room" situation of some sort.  I think anyone looking to house-hack while still being within an hour commute to NYC has to have realistic expectations.  They will likely LOWER than net overhead as compared to renting in most parts of NYC Metro, but they shouldn't expect to "live for free".  But if you could lower your overhead by house-hacking, not only are you saving the $ difference every month, you're no longer throwing money away on rent, while building equity through loan paydown and property appreciation and taking advantage of rising rental income over time (plus various tax benefits). 

    1Reply
  • Justin Suh
    New to Real Estate · Jersey City, NJ · Member since 2020 · 3 posts · 0 votes
    6y

    All very useful information! 

    @Betty Xin My fiance and I are also looking to house-hack a MFH in NJ that is close to the city. I currently live (renting) in downtown JC but exploring other areas in Hudson County such as The Heights & Journal Square for a house hack. After reviewing a few listings / numbers in those areas, good MFH deals are a difficult to find and cash-flow (or break even) given high principal, interest, and taxes. That said, I see much better listings in Bayonne area. 

    @Max Vishnev Curious to know your thoughts on West New York, NJ? Commute into the city is 20min by bus depending on where you are. Also seems like monthly rent is comparable to what you said about Bayonne.  

    0Reply
  • Max Vishnev
    Real Estate Agent · Bayonne · Member since 2019 · 52 posts · 80 votes
    6y

    Hi @Justin Suh: I just looked at WNY inventory for 2-family properties with at least 3 bedrooms total and there are only 5 currently on the market, one of which is a short sale.  Median price of these 5 is 499k.

    West NY definitely has potential and is attracting more investors as other areas (like most of JC) have become more competitive and expensive, but very limited inventory makes it challenging to find a good house-hack opportunity.  Also, WNY and Bayonne have different demographics and tenant pools (though there is some overlap).

    PM me if you want to chat house-hacking offline.

    0Reply
  • Betty Xin
    OP
    Member since 2020 · 6 posts · 1 vote
    6y


    @Max Vishnev what do you mean by different demographics and tenant pools? I'm curious since I'm new to NJ in general, since both WNY and Bayonne are not far from Manhattan, wouldn't they attract similar tenants? Thank you! 

    @Justin Suh  thank you for sharing you experience! Let's keep each other posted on our progress and hope we could all find a good deal. How do you feel about purchasing a home in the current economy? One of my biggest concerns is the uncertainty of economy. 

    0Reply
  • Richard Douglass
    Member since 2020 · 13 posts · 12 votes
    6y

    @Chace Fraser this isn’t my thread but your comment on the timeline is reassuring to me! My lease is up end of July and I thought I was being premature by already trying to secure a lender and agent. It seems like I might actually be on the right track! When would you suggest I actually secure the pre-approval letter? I don’t know that I could afford to close much earlier than the end of my lease because rent plus mortgage would be a bit much (I’m waiting to hear back from my office on subleasing in case I find something sooner).

    0Reply
  • Chace Fraser
    Realtor · Portland, OR · Member since 2017 · 357 posts · 259 votes
    6y
    Originally posted by @Richard Douglass:

    @Chace Fraser this isn’t my thread but your comment on the timeline is reassuring to me! My lease is up end of July and I thought I was being premature by already trying to secure a lender and agent. It seems like I might actually be on the right track! When would you suggest I actually secure the pre-approval letter? I don’t know that I could afford to close much earlier than the end of my lease because rent plus mortgage would be a bit much (I’m waiting to hear back from my office on subleasing in case I find something sooner).

    Now is the time to build your team and get pre-approved. It will take a little time to do so and you want to be ready. Your pre-approval letter should last long enough for you to start shopping. And as long as nothing changes, it should stay good for a while but DON'T DO ANYTHING SILLY LIKE GO BUY SOMETHING ON CREDIT! Because that could wreck it for you. 

    And if you work it backwards, in an ideal scenario for you, you will want to close in the first week of July so you can move all of your stuff into your new place. So that means you'll need to be under contract (easier said than done) by the beginning of June or late May (always a hot time for the real estate market), which means you'll need to start shopping in April and be ready to pull the trigger in May. 

    You'll want to err on closing in June rather than August. That's because you won't be making a mortgage payment the month you close (that's actually paid at the closing table) or the following month (because PITI is paid in arrears). What that all means is if you close in June, you won't have a mortgage payment in June or July.

    Get your team together, and make certain everyone knows you need to close with enough time to move out.

    0Reply
  • Richard Douglass
    Member since 2020 · 13 posts · 12 votes
    6y

    @Chace Fraser thank you so much for the detailed response—all of that information is helpful! I’m excited to start meeting with agents and lenders this week. I’m sure I’ll be back to the forums with more questions. Thanks again.

    0Reply
  • Justin Suh
    New to Real Estate · Jersey City, NJ · Member since 2020 · 3 posts · 0 votes
    6y

    Thanks @Max Vishnev!

    @Betty Xin Yes lets do that! Best of luck to you and your boyfriend. Thats something I've been contemplating myself given the current market conditions.  Although I do believe if the numbers work for any deal, it shouldn't play too much a part. Also understanding the market (i.e. population growth, employment, location, etc.) gives you a good sense of consistency even during poorer economic conditions. 


     I'm a newbie myself so curious to hear others opinions as well. 

    0Reply
  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    6y

    @Betty Xin welcome to BP. Hudson County and Bergen County (areas along the hudson rivers ) are great places to explore. The tenant quality is good. It is easy to find a family with stable income. I work and invest in Hudson County. Multi family houses are quite old here. A lot of them were built in 1930s or before. There are newer options. Houses built after 2000 are great for first time home buyer, with low maintenance but relatively more expensive. When you start looking, you will see the differences. 

    in terms of appreciation, I think Hudson county has great potential, but keep in mind most areas has appreciated a lot since 2012. Depending on the location, Jersey City downtown and Greenville have very different growth rate. Just to give you some idea, I bought a two family house in west new york in 2015, the price has gone up 30%~40% since then. 

    In my opinion, Multi-family are more desirable. It is easy to convert a two family house into one but not the other way around. 

    0Reply
  • Betty Xin
    OP
    Member since 2020 · 6 posts · 1 vote
    6y

    Thank you @Diana Tian for your advice. 

    Do you think there's still room for appreciation in your opinion? Hudson and Berger are great areas to invest in... but it is getting really expensive. Hence, I was thinking of house hacking a multi family so I have a tenant to subsidize my mortgage. 

    I did find that multifamily in those areas are pretty old... do you think it's better to invest in a multifamily that's built after 2000's although slightly more expense, instead of getting a multifamily that's built in 1930's but relatively cheaper. The older the house, the more maintenance and CAPEX spending....

    0Reply
  • Ronan DonnellyPro Member
    Investor · New York City, NY · Member since 2012 · 332 posts · 385 votes
    6y
    Originally posted by @Betty Xin:

    Thank you @Diana Tian for your advice. 

    Do you think there's still room for appreciation in your opinion? Hudson and Berger are great areas to invest in... but it is getting really expensive. Hence, I was thinking of house hacking a multi family so I have a tenant to subsidize my mortgage. 

    I did find that multifamily in those areas are pretty old... do you think it's better to invest in a multifamily that's built after 2000's although slightly more expense, instead of getting a multifamily that's built in 1930's but relatively cheaper. The older the house, the more maintenance and CAPEX spending....

    Hi Betty, buying somewhere that you can force appreciation by improving the asset is a safer strategy than buying and hoping for appreciation. Not to say that you should ignore the possibility of an appreciating area but just don’t count on it. Good luck! 

    [email protected]
    0Reply
  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    6y

    @Betty Xin in my opinion, hudson county is still much cheaper than most areas in queens and brooklyn, even considering into the high property tax in NJ. I think it is still a good area for long term holding. 

    For house hack, I like houses at an average condition (not the worst or the best), like houses built around 1970, rare but still exist. It may need some cosmetic work. Are you comfortable with minor upgrade or you are looking to turn-key? 

    0Reply
  • Jason LeePro Member
    Real Estate Agent · New York, NY · Member since 2015 · 401 posts · 235 votes
    6y

    We are at or approaching a peak/plateau in this cycle. YOY appreciation has slowed dramatically in Hudson and Bergen Counties and in some segments prices have gone down. Having said that, if you're looking near the city, with good transportation, have a long time horizon, and would otherwise be renting, then I'd say it's somewhat futile to try to time the market. Over the long run, both prices and rents will appreciate.

    A major factor if you're considering house hacking is what you can stomach in terms of renovations. Some of my clients want to gut renovate. They have the time, patience, experience, and desire to purchase a wreck. Others have no interest or time and prefer turn key. Then there's the whole spectrum in between. There's a premium for turn key but there are also other costs (emotional, time, tuition) to having to do work on a home.

    0Reply
  • Diana Tian
    Real Estate Agent · Jersey City, NJ · Member since 2014 · 218 posts · 50 votes
    6y

    @Betty Xin in my opinion, hudson county is still much cheaper than most areas in queens and brooklyn, even considering into the high property tax in NJ. I think it is still a good area for long term holding. 

    For house hack, I like houses at an average condition (not the worst or the best), like houses built around 1970, rare but still exist. It may need some cosmetic work. Are you comfortable with minor upgrade or you are looking to turn-key? 

    1Reply
  • Max Vishnev
    Real Estate Agent · Bayonne · Member since 2019 · 52 posts · 80 votes
    6y

    Well said, @Jason Lee!  Timing the market is a fool's game -- whether it's stocks, commodities, or real estate.  Flippers are most at risk with short term market changes, but buy-and-hold investors or house-hackers should not be as concerned with short-term market swings, since people will always need a place to live and both rents and property values go up over time.

    0Reply
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