House hacking in NYC. The Bronx specifically!

[Ceasar Rosas]

Hi everyone,

I just wanted to write a bit about house hacking in NYC. I started in 2013 buying a multifamily using an FHA loan with a sellers' concession included. My total out of pocket for that house, that cost 400k, was about 22k with minor repairs and such. Throughout the time I've been living there, I've spent about another 10k in updating. I own a 2 family with an unfinished basement. The PITI including PMI is $2717. I get $1650 in rent from my upstairs tenant. That means I definitely come out of pocket for a 2 bedroom unit with a large backyard, about $1100 not counting utilities. I live in a pretty good neighborhood in the Bronx, where values have been on the rise. If I put my house on the market today it would sell for right about 475k.

The reason for writing this is because thanks to Biggerpockets I have met quite a few people that I have started to develop relationships with and am looking forward to doing business with. I just wanted to shed some light on my thoughts about house hacking in NYC. If you are buying FHA, VA, or some other form of low down payment you have to understand that if you are living in one unit, it will be near impossible to live mortgage free and cash flow, especially being that the better deals usually go to people with better terms. The only way I've seen people cash flow is that they choose to live in a finished basement that is not part of the legal units (Disclaimer: I am not promoting this, but I've seen it done. It can be a legal issue that can cost quite a bit of money down the line).

I recommend that if you're thinking of yourself as an investor, do your numbers as though you are putting 25% down and all legal units are rented out, not you living there. Look for possible value add deals and aggressively pay off at least 20% of your equity so that you can refinance into a conventional and knockout the PMI.

This is my experience in NYC. Especially in the Bronx and lower Westchester. Forget about Brooklyn and Manhattan. In this market the best deals go to cash buyers period. Even that is getting more and more difficult. For a discount on a property now a days, you have to be able to solve a problem. Problematic tenants, Co issues, violations on the house, extensive renovations, etc... FHA and VA and sometimes even conventional will not let you close on a property with these issues. Unfortunately I've met quite a few people that get stuck in the analysis paralysis stage, with not enough funds to buy cash or conventional and looking for the deal of a lifetime. Your 1st swing can be a home-run, but more than likely it will be a base hit.

I tell people, worst case scenario, if I did nothing else for 30 years in real estate and my house is only worth 500k, I would have a net-worth of at least 500k and an income of 3k + a month, off of this one house. I don't think it's a bad deal, I think it's pretty good.  

I really would like to hear people's thoughts on this. Again this is more my market I would assume hot markets like NYC are similar, but I have experience here and in East Stroudsburg, Pa. I know nothing of Colorado for example. Haha!!!

I hope this helps some of my New Yorkers and good luck and much success to every one here!!