First Time House Hacking NYC/NJ Please Help!

[Matthew McConnell]

Hi all! I am new to this group so thank you all for the incredible information and advice.

My question: My lease is coming up in August in Hoboken, and my gf and I would like to build equity in a place where we can rent out a portion of a multifamily building. Places in NYC/Jersey (Jersey City) run $500k and higher, and taking a $475k mortgage at 5% down First-Time Home Buyer loan seems risky despite cash flow from another unit or two reducing expenses. I never know if there is going to be further layoffs, so what would you guys do? House hack? Continue to rent and try (learning and executing) BRRRR with a partner? Continue to save fore more money down?

Thank you!  

[Max Vishnev]

Hi Matthew,

Great question.  Everything in life entails risks and costs (whether actual or "opportunity").  If you keep renting, you'll be on the hook for the rent you owe, even if you were to lose your job (a lease is a legally binding agreement).  So my question to you would be:  If you could buy a multi-family property, whereby, you can lower your monthly net housing cost to less than your current rent, is that less risky or more risky that maintaining the status quo (in your case continuing to pay rent to your landlord)?  Especially when the cost of borrowing right now is so low.

You can put down as low as 3.5% for a primary residence with an FHA loan. Of course, you'd also need 13k to 15k in total closing costs in NJ, but some lenders may be able to roll some or all of that into your loan amount.

To me, the benefits of locking in a 30yr mortgage at historically low levels on a multi-family property are too great to ignore right now.  You lock in a fixed and very low cost of debt, while benefiting the the numerous advantages of real estate ownership (especially when house-hacking).  Namely:

- Building equity from annual principal paydown (funded partly or fully by your rental income) and long-term property value appreciation (we know that in the long run, real estate values rise, partly due to inflation).

- Rising rental income (rents rise over time as well).

- Tax advantages (plenty of resources online about this topic).

- Experience, both as a property owner and as a landlord.

- NOT PAYING RENT.

Hope this helps.  

- Max