All Forum Posts by: Robert McCormick

Here's the story...

I've been planning on buying my own duplex that I can house hack for about a year now. I have also set a timeline for myself that by July of 2021 next year, I will have enough money saved up to purchase. However, one of my major concerns so far has been that, even though I could qualify for about a $300k purchase price, my money would be TIGHT with the PITI and all operating expenses-if I bought a duplex for max of $300k.(I live in North Jersey/NYC Metro Area so prices are STEEP) I've talked it up to a bunch of my family and friends and I believe that I can realistically own my first property by next summer using this real estate investing strategy. Yet, at times I'm hesitant I may be in over my head financially.

Then in come two of my friends, who recently brought up that they also wanted to get started in real estate investing in small multifamily properties and eventually into large apartment buildings, somewhere down the road. We brainstormed creating an LLC collectively so we could start investing without any of us being personally liable. However, the more that I think about it, the more I think it might be easier for all of us to house hack together just to get our feet wet. Then, once we get through this first deal and get a feel for the process, we could consider starting an LLC and get into larger and larger properties.

Does this sound like a more realistic/practical option of bringing them in on the house hack or would it be smarter to keep my own duplex investing goal for myself and invest with my two friends separately? 

Thanks!

So two friends and myself have been thinking about starting an LLC to get started investing in small multifamily properties in our area in Northern New Jersey. We are somewhat familiar with traditional financing through a mortgage lender, but are considering forming an LLC where we wouldn't be personally liable, should things turn South. It is also worth noting we are new to real estate investing and don't currently have any deals under our belt.

We are not too familiar with LLCs, so we are curious what would be the best way to go about funding this venture, if we did take this route.

Are our only options obtaining capital through private lenders or are there more traditional loans out there that are also available? Also does our lack of experience negatively affect us in a way that would severely limit our options, if so what other options would be available if private lending is unavailable?

If you were in our spot, what would you do?

Thanks!

@Jonathan Greene Thanks for the feedback Jonathan. I can see how this is a common mistake for new investors, such as myself. While I'm definitely eager to get started, I do want to be sure that I have the knowledge and funds in place before I take that leap. I also want to be conscious that I'll need to be patient and need to find a deal that actually makes sense.

The more I learn, the more I'm realizing how important it is to improve the property at some capacity, if I want it to appreciate overtime. I've heard of people fixing up the unit they live in, while renting out the other and then improving the 2nd unit once the tenant moves out. That seems like a smart route to take. I've never even considered a two-family with a boarder unit, and the idea of renting out both units while still living in the property sounds intriguing and is something I definitely would look into. Thanks for the input, I appreciate your comments!

@David Thomas You raise a good point that searching for a single family home will likely have the same challenges as looking for a duplex would. To that point, you've also brought up things I haven't even considered regarding, separate baths, kitchen sharing, and overall interaction with a potential stranger who would be my tenant. I wouldn't mind roommates at this stage of my life right now, but I know I would probably prefer a separate living space if given the choice.

As it stands today, I'll have about x amount of dollars saved up by June/July of 2021, so my timeline to purchase can be flexible anytime after that date. I could also consider expanding which types of properties/neighborhoods I'm looking at if they look like they are in areas which could potentially appreciate and where I can add value through forced equity as well. I'm definitely shooting for working with an investor friendly agent with experience though which could add a lot value and fill in my knowledge gaps.

I appreciate the input David, you provided some quality insight that was very helpful.

@Ted Felsberg Hey Ted, I appreciate the advice nonetheless. It's always good to hear multiple opinions.

I think going for off market deals can definitely be rewarding and can be a useful tactic. I'll keep that in mind, if I find my searches aren't generating what I'm looking for.

Thanks for the encouragement and best of luck!

@Patrick Pierre I haven't really dived too deep into looking for a partner, but it's definitely worth considering. Also, saving up for a bigger down payment/increasing my income could also be a potential route, I would just be hesitant how far off my timeline that would push me.

You drive a fair point, making the sacrifice to extend my commute could potentially be worth it in the long haul and I would only really need to do that for at least a year or two.

Thanks for your thoughts and good luck with the duplex in CA!

@Twana Rasoul I agree, every situation is different and it really depends on one's comfort level. Thanks for the feedback!

So I'm not planning on throwing out my goal, but hear me out...

My original plan has been to buy a duplex within a year and house hack it to live in one unit and rent out the other unit. However, after looking for multifamily properties in surrounding areas on listing websites (such as Zillow) I have found that any duplex I find is either a) nowhere near where I work (+1 hour commute time) b) seems to need A LOT of renovation work or c) is out of my price range that I can afford. There are few that do meet my criteria, but they're typically found in rougher neighborhoods I would want to avoid. 

As a result, I have been considering if it may be a better idea to pursue a Single Family Residence in place of a duplex, and potentially house hack rooms out of that? [It is worth noting that I currently live in Morris County, NJ in the NYC Metro Area so prices are relatively steep and I am planning on qualifying for a mortgage alone. Also I've heard landlord laws in NJ aren't as friendly as other states, so I'm not sure how plausible house hacking a SFR is.]

I'm not throwing away my goal of buying a duplex just yet, but I am curious about exploring my options and potentially pivoting my goals if it makes sense. I would value any feedback anyone is willing to give.

What would you do?

-Rob