Condo or Small Multifamily NYC House Hack?

Question

Good evening everyone!

My name is Nicholas Flores, my wife Sonia and I are from the Washington DC area but I have been recently offered a position to relocate to NYC. My wife and I are deciding on whether to buy a condo, or possibly a small multifamily (duplex) as our primary residence, in one of the outer boroughs or possibly in Manhattan if we can swing it. My question is, if we decide to go the condo route, is it true that the down payment requirements are 20%? If we decide to go small multifamily or (2 unit townhome) should we be able to do a FHA 3.5% down loan? If we do decide to go the multifamily route, do I need to register the property as a rental in NYC? Are there any other questions or concerns I should be thinking about? NYC seems like such a daunting market to learn, but hey like Ol' blue eyes said "If you can make it there you can make it anywhere". Any and all information is greatly appreciated

Best,
Nicholas

Ecaterina Katerina Morosan · Answer

Hi Nicholas, welcome to NYC!

After working with homebuyers and investors for many years and reviewing and analyzing the best routes for them, I can say that 95% go with multifamily. The other 5% are just too busy at work that they scared they'll have to pick up another job of being a landlord.

If we're looking at multifamily vs condo, buying multifamily means buying a piece of NYC land. That's why you'll see a hire appreciation. Plus it's a cash flowing asset. Let's say if you relocate in the next few years, your asset keep cash flowing and going up in value.

Condo can be a good investment as well, but the appreciation and demand is lower (generally speaking, case by case). Also , let's say you relocate next year and decide to keep your condo as a rental. With 20% down, your mortgage payment  +common charges  +taxes in total might be higher than current average rent. So the more doors you have, the less risky it is.

Either way, ownership in NYC is a long term game. And both properties will appreciate. Happy to hop on a call to answer the questions you might have.

Eric Hajdu · Answer

Nick,

Congrats on the new job and upcoming move, from an investment perspective, i would definitely consider the multi family route, it gives you so much more flexibility and control.  I have been trading up Brooklyn Condos for over 20 years and finally bought the dream apartment a few years ago, 3 bed/3bath, outdoor spaces, parking space, statue of liberty views, etc., and to be honest I wish I would have used the funds to buy a multi family instead.  The common charges and taxes keep going up, there are several assessments, and I'm pretty limited with what I can do with the unit as far as adding value.

With a multi family, you can rent one unit out, make condos out of the building, add sq. footage, convert to large single family, really endless potential.  Sorry for the long winded response, but if you can swing it, go with the multi family, which continue to maintain their value very well amongst the sea of new condo construction.  Either way, good luck, and please feel free to reach out if you need any input on neighborhoods, etc.

Mohammed Rahman · Answer

Hey @Nicholas Flores - congrats on the new job!

I'm an investor and realtor based in NYC and can shed some light.

What you're referring to regarding the requirement of 20% down is more strict for co-ops. Condos have looser requirements than co-ops when it comes to their board application process.

When buying a condo, you own the actual unit and get a separate tax bill (ontop of paying monthly maintenance towards the buildings' costs). When buying a co-op, you're buying shares that entitle you to a proprietary lease of a specific unit (you don't have a separate tax bill).

Co-ops are known to be anti-landlord as they're setup primarily for owner occupants (think people that want to know who their neighbors are, don't like subletting, etc.) - Condos are more expensive than co-ops because of this reason.

There's also other things to consider when buying an apartment (condo or co-op) vs. a standalone multifamily home.

To answer your other questions:

- Yes you can still do FHA for a multifamily home

- You don't have to 'register' the property as a rental in NYC if you own a multifamily and decide to rent it out. Only time you'd have to register anything is if you decide to do short term rentals via AirBNB or other STR sites.

- Plenty of other questions you should be asking... I actually have videos on my YT channel for first time househackers I encourage you to check out (ClosedByMo is my YT account).

Otherwise, do connect with me via text (number in signature), I'm happy to point you in the right direction and work closer together.

Nicholas Flores · Answer

Good morning Eric,

I really appreciate the response. My gut is definitely telling me multi. What your saying has a lot of truth and weight go it, really appreciate you sharing your perspective.

Harold Looney · Answer

Nicholas Flores - welcome to the NYC Market. It is my understanding that if you have a 5 Unit Building or less you do not have to register as a rental if you are doing 30+ days leases.

There are different rules if you are doing short-term rentals like airbnb.

I've owned a 2 Unit Building in Bayridge Brooklyn for over 16 years. My biggest challenge is retaining reliable maintenance and repair professionals.

Nicholas Flores · Answer

Hi Harold,

Thank you so much for the response! Very cool about your Brooklyn properties. Labor has definitely been a challenge in the post Covid era. Thanks again Harold! Have a great day.

Nicholas Flores · Answer

Hi Ecaterina,

Thank you for the response! You are absolutely right about owning the NYC multifamily, and there is definitely something to be said about owning the land as well . I appreciate you offing to hop on a call, I will be in touch. Have a wonderful day!

Best,

Nicholas

Ryan Thomson · Answer

@Nicholas Flores good questions! In Colorado Springs, we can get a condo for 3.5-5% down. Not sure why it would have to be 20%. Maybe that is a condo/HOA rule.

If you get anything 2 units or less you can use FHA to get it for 3.5% down. Anything above 2 units has to pass a self-sufficiency test. I'm not sure about NYC but in Colorado Springs no triplex or fourplexes pass a self-sufficiency test.

Condo or Small Multifamily NYC House Hack?

Most Popular Reply