First time house hacker

[Malik K.]

Hello,

I currently live in Philadelphia but may move in the future to NYC. I was wondering what would be some good areas to consider for a first time house hacker. It seems triplexes or quadplexes are the ones that are best for cash flow with an FHA? Are they harder to manage than duplexes? I was thinking about getting a 1 bedroom for myself and then having 2-3 other 1 bedroom units for renters.

I have a fair amount of savings so I was wondering whether there’s any benefit to putting 20-25% down instead of 3.5%? It seems most properties in good neighborhoods are in the 600k+ range? Will it take years for me to be able to cash flow in that case? I’m trying to figure out if it makes more sense to just do easy investing in the stock market especially if I plan to move out of philly to nyc in the near future. On the other hand people keep telling me there’s never a “good or bad time to buy”.

Sorry for the barrage of questions but would really appreciate any advice/insight! Thanks! 

[Wale Lawal]

@Malik K.

No need to apologize for the questions – real estate investing is a big decision, and it's great that you're seeking advice. Considering your situation and goals, here are some insights to help you navigate your options:

1. Selecting areas: Look for neighborhoods with high growth potential, amenities, and public transit when choosing places for house hacking, especially in big cities like NYC. Rental property demand might be advantageous in some areas. It is essential to conduct research on school districts, crime rates, and market trends.

2. Property Type: When it comes to cash flow, triplexes and quadplexes might be excellent options, particularly when using FHA loans. Although maintaining triplexes or quadplexes could take a little more work than maintaining duplexes, the benefits of having greater rental revenue may exceed the difficulties.

3. Down Payment: Lower down payments, such as the 3.5% required for an FHA loan, let you keep more of your funds, but they also result in higher monthly mortgage insurance costs. Lower monthly payments and improved cash flow might be the outcome of a bigger down payment (20–25%). It's a trade-off, so consider your financial objectives and priorities.

4. Property Prices: Real estate may be pricey, particularly in affluent areas of large cities like New York City. It may be necessary for you to assess the property's possible appreciation, rental revenue, and general market circumstances. Although short-term cash flow may be difficult, long-term appreciation may make up for it.

5. There are advantages and disadvantages to the stock market and real estate. Along with potential income flow and tax advantages, real estate also offers physical assets. Liquidity, diversity, and low managerial complexity are all offered by stocks. That is dependent upon your time commitment, investment objectives, and risk tolerance.

6. Market timing: Keeping an eye on the state of the market is crucial, even if there is never a perfect moment to buy. Prioritize your financial situation, the local market, and interest rates.

In conclusion, there are unique considerations for every investing approach. Spend some time conducting in-depth research, including speaking with a professional in the field, and base your choices on your objectives, your tolerance for risk, and the particulars of the markets in the locations you are considering.

Good luck!