Is House Hacking in NY area a good option?

Question

Hi,

I am a 29 yo investor who is planning to make an investment in the coming future. I live in Newport, NJ and pay close to 1600$ in rent and share the place with roommates. I am sick of paying rent and moving everytime because the building decides to increase rent. I believe the NJ, NY area is pretty good and would see myself living in the future. Thus, I was considering doing a house hack to save on rent.

From my research, Manhattan is definitely not an option but other boroughs like Queens, Bronx might be. Also, Jersey City could also be a good option to house hack. I tried researching and could not find much posts of people who do this.

Is there anyone in the forums who currently does it or has done it in the past, I would like to understand your situation and see how I can do it for myself.

Thanks

Andrew Postell · Answer

@Vivan Bhalla you need to do 2 things here to find out if this is possible:

1. Get prequalified for a mortgage.  This will tell you how much you can "afford".

2. Get with a realtor.  They will then show you the houses in the price range you can afford.  That will tell you if this is even possible or not.

That's the real truth behind your question.  Both of those steps are free to do so it's just a little work and you'll know the right information to make a good decision.

Benjamin Sulka · Answer

Hey Vivan!

You can house hack with as little as 3.5% down with an FHA loan as long as you owner occupy.

Check with lenders in your area and see if this is something they offer. You do have to have 2 years of income history but given that you're 29, I'm sure this won't be a problem.

Determine what numbers make sense in your area.

Let me tell you what my criteria is to give you a better idea of what I'm talking about. My plan is to house hack a duplex. You can also house hack a single family home and rent out rooms.

I'm looking to purchase a duplex at around $200,000 with 3.5% down in my market (Cleveland area). I need to come up with $7,000 for a down payment, $9,650 for closing costs (5% of the loan amount of $193,000) and I'd like to have 6 months of PITI in reserves (About $12,000). That means I need to have $28,650 up front which I'm saving towards throughout the course of this year.

You can house hack with a low down payment but this also comes with PMI which is typically 0.5-1.5% of your loan amount. Something else to consider when doing your calculations.

Market rent in this example area I'm looking at is $1,350 (estimated). With 3.5% down on a $200,000 property assuming an 7.5% interest rate in my area:

- $1,350 mortgage ($193,000 at 8% interest paid back over 30 years)

- $400 property taxes (Conservative estimate. Taxes in my area are high)

-$107 home owners insurance (Ohio average)

-$240 PMI (also conservative)

-$67.50 for vacancy (5% of monthly rent)

-$135 for capex (10% of monthly rent)

-$135 for property management (10% of monthly rent)

-$200 in utilities (monthly estimate)

=$2634.50 in total monthly expenses

Assuming the market rent is correct, this hypothetical property would cash flow $2,700 - $2634.50 = $65.50 per month

This is not a ton of cash flow but the reason I did all of the math was to give you an idea of everything that goes into it. There are a lot of ways to make this work, even with high interest rates. Do the math for yourself on multifamilies or single family homes in your area.

Happy House Hacking!

Ryan Thomson · Answer

This is great advice and certainly the best first steps!

Mohammed Rahman · Answer

Hi @Vivan Bhalla - I'm seeing a lot of comments here about househacking. Not too many from people that are actually based in NYC.

I'm a househacker, realtor, and investor in NYC.

Due to the high cost of living here, NYC is NOT a cashflow market... unless you're squeezing out every single dollar possible (renting the driveway, garage, basement, backyard, etc.)

However, the high cost of living is due to the incredible demand people have globally to live in NYC. The demand carries the property prices to appreciate steadily year over year.

Are there off years, of course, just like any other region NYC is not immune to market conditions - however in the long term, NYC is an appreciation, equity, and tax writeoff gameplay.

P.S. You might enjoy some of the videos I put out on my YouTube channel. I have one coming out this Friday about why NYC is not a cashflow market.

Alfath Ahmed · Answer

I would look into the Columbus market. It's a great place to invest for both appreciation and cashflow. I recommend investing near economic bases near downtown and surrounding areas. Most of my clients look into areas like Old North, Old Town East/King Lincoln Bronze Ville, Merion Village, Driving Park, North Linden, Hungarian Village, Bexley, and North Hilltop.

Shawn Mcenteer · Answer

Hi @Vivan Bhalla on the NJ side of things you'll consistently see the most favorable ROI in Essex County along transit hubs.   The rents in Essex are not always as high as JC area but the good news is the price of entire is much less.  What makes suburbs west of NYC so desirable is access to the city, particularly towns on the Morris/Essex line with direct trains for commuters. These are the towns that helped me and my wife get to financial freedom via house hacking.  All the best with your search

@Mohammed Rahman is a NYC legend! 100% check out his youtube

Salim Koroma · Answer

I currently house hack a property that I own. do your due diligence and if the investment meets your metrics then go for it. Personally, I think house hacking can be used as a vehicle to get you to financial freedom if that's what you're seeking. if you have questions hit me up. good luck

Ryan Thomson · Answer

@Vivan Bhalla this is a really great idea! You can reduce your monthly payment and start to build equity. Your finances will thank you later.

Here are some resources I found really helpful on my journey:

1. For podcasts I really like the House Hacking episodes on Bigger Pockets Podcast and other channels. Here is a playlist with the best House Hacking Podcasts I’ve found: https://open.spotify.com/playlist/4A6uLsPfdWEMmJhG4TSjyb?si=743bb403548f47fb

2. Great beginners guide: https://www.biggerpockets.com/blog/wp-content/uploads/2022/08/Ultimate_Beginners_Guide_BiggerPockets.pdf

3. The Book on House Hacking Strategies by Bigger Pockets is also a fantastic book

4. Happy to talk if you want more advice

5. Connect with a realtor who understands house hacking and has invested themselves

6. Connect with a lender to see what you qualify for and how you can improve that situation

7. Go to local Real Estate meetups and learn from people there

Abel Curiel · Answer

Hello @Vivan Bhalla!

I would be sick of the moving and cost of moving if I were you too! Rising rents, deposits, etc. really make us consider if the time/money is better spent on finding opportunities for yourself.

Queens and Bronx will have options at lower price-points and with larger lot sizes when compared to Manhattan and Brooklyn. Whether or not the househack deals in those boroughs will lower your current cost of living will depend heavily on your down payment and # of units.

Just going off of what you posted here, you'd likely need a 2-family with ADU or a 3-family under $1M in order to lower your current living expenses. Tough to find but not impossible - we just helped a client purchase a legal 4-family under $1M in Brooklyn.

Jersey City has a better price to rent ratio when compared to NYC's boroughs. The downside here is that NJ doesn't see the same level of demand or appreciation when compared to NYC.

HERE is a quick comparison I put together for a client recently.

All the best!

Abel

Laura Shinkle · Answer

@Vivan Bhalla it sounds like you're not sure where to start and you searched for someone specifically doing househacking in your area. Even if there aren't many ppl in your specific area doing it, the basics are the same across the country.

The beauty of househacking (and why it's popular) is it allows you to buy and investment with 3-5% down (low cost of entry, relatively) and ideally decrease your living expenses at the same time. The tenants then pay you rent, which goes toward pay down of your mortgage (thanks tenants!). You get appreciation as the market ideally goes up.  You also don't have to worry about rent increases, deposits, pet fees and moving costs. The other side of that coin is you're responsible for maintenance.

There's different types of properties you can do this with. Traditionally, multifamilies are the favorite since you get your own living space. You can also buy a home with multiple rooms and rent by the room. You can do long term tenants, mid term furnished or short term tenants (Airbnb, VRBO, etc). STR tenants will be more work, but likely more cashflow.

Step 1: Talk to a Realtor in your area that seems competent in this strategy. Or at least one that you can explain it to and they're on board and can recommend locations/lease amounts, etc.

Step 2: Talk to a lender. I put lender second because often Realtors can connect you with great lenders to talk to so you're not just randomly calling banks.

Once you're preapproved, look at what type of properties you can afford in different areas. THEN dial in to what rent would be in those areas and if it'll work for you. Once you have an area locked down, jump on it when a good property comes up. Your Realtor will guide you from there.

Take that first step, you won't regret it! You can find investor friendly agents in the 'find an agent' tab at the top

Is House Hacking in NY area a good option?

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