All Forum Posts by: Steve Schulman

@Roe Wilkins FHA 203k loan is your best bet. To answer your question, the bank will look at ARV rents and will be a lot more conservative thereof. I've closed multiple FHA 203(k) loans with clients and have utilized one myself, and a handful were on 3-4Families. That being said, it's a lot tougher these days, in my north Jersey market at least, to make it work.

Depends on the lending institution, though the short answer is these banks are strict. Think about it, and it's purpose. Most "first-time" buyers are going from NEVER owning real estate to controlling and operating 3-4 units. I'd say it's likely they bite off more than they can chew and drop the ball IF the the bank didn't set guidelines rather "regulate" these loans insured by the Federal Housing Administration (FHA). Remember, there's an investor on the other side of your loan, who's taking on the risk. Hence, the bank throws what's basically a 25% vacancy rate on the building.

That said, I have preferred lenders I use with some "pull" albeit it has to be with reason. I also know lenders who have appraisers in their pocket and can get the rents needed to pass the FHA self sufficiency. 'Tis the relationship business of real estate. I've come across these Robin Hood-like loan officer's from being an investors agent in the business, but also from scouring the MLS and seeing 3-4Family homes in "high-cost" areas that closed with an FHA (not FHA 203k) loan-- then reaching out to see what gives?

Hi @Julie Verardi. Bergen Lafayette is good (Communipaw is great!). Greenville not so much. It's best to be north of the Light Rail stations unless your south of Garfield Light Rail in Bergen Lafayette, one or two blocks off/on Garfield Ave. Google Bergen Lafayette you can see the section of the neighborhood that goes south of Garfield Light Rail. This area has gentrified in big part because of the Communipaw neighborhood, Berry Lane Park and easy commute-quick access to rt 78 and the LR starting from Bayonne. I have closed a bunch of multifamily's over here and have a couple client deals pending now. Bergen Lafayette is a good value and 'middle of the market' place to invest. 

The trend in all of Hudson County is the further east the better. Keep that in mind but budget is important too. Stay close to public transport, transit oriented hubs and developments i.e 1888 film studio coming to Bayonne coming to Bayonne's old Texaco site which will be NJs largest film studio and walkable!! Also parks and recreation infrastructure i.e on the West Side you can find better value and by Lincoln Park you can't go wrong. That RE wave we're jumping on as investors is heading there.

That said, two years ago I used that as a West Side, MLK & Garfield Light Rail line as a benchmark but as the market and such has changed, I'd say if anything a couple blocks south of the Light Rails but not much further into Greenville. At that point, might as well come 10min south to Bayonne for better value, which I did :-)

It's all relative though, in the end. That's my insight based on where I'd live/invest myself just for some direction. As a licensed Realtor I have to be careful with my words and what I say. 

Hi @Mike Kalob. Anything 5+ unit is considered commercial RE. Therefore, if you move in you could be committing mortgage fraud. If you're buying cash, that's one thing; however, if you're financing your purchase, I'd 100% recommend confirming this with your lender. Even if you buy outright and don't put it in an LLC. What happens thereafter is between you and the municipality.

In Union City, and Weehawken for that matter, you can "reset rents" as an owner occupant and non LLC buyer for 3-4Fam Residential after living in the property for some time; 5+ Commercial on the other hand, the tenant laws and regulations are a lot stricter-- and because of that I see sub 10 units listed under $1.5M on the MLS, which is unlike any other Hudson County market for such property type. Not to discourage you, just to make sure you put the right professionals in your corner and speak with a knowledgeable attorney in the area, who's familiar with the local ordinances and rent control.

Hey @Vincent Tricarico Congrats on the new job. Love to hear it all.

I started my REI journey by house-hacking and full-gut rehabbing a 1920s built two-family in Bayonne with an FHA 203k construction loan. Gained invaluable experience and forced serious equity so no complaints there. Wish I would have jumped in sooner, though. I rented for 3 years in the JC Heights, from 2016-2019 with hometown friends-- after seeing the gentrification, turnover and development happen first hand while living in the trenches, I got the itch and knew it was time to get in. Took my motorcycle all around Hudson County, looking for the best market, and best location in said market per criteria (and budget, which played a big part), and never looked back.

Don't let this market scare you. You don't get rich from cash flow, wealth is built from appreciation and this "expensive market" is what it is for a reason. You have a NYC a global international market at your front door step, and not one but two inner City's (Jersey City & Newark) in close proximity with jobs, opportunities & such... Demand is not going anywhere, it has and in our lifetime at least will outweigh supply in this market... That said, you're not a professional investor (not yet at least). Don't over-analyze or over think it. It's all unrealized gains & losses, unless you sell, which shouldn't be a thought at 22 y/o. You're house-hacking a home to turn into a long term buy & hold when you move out, to jumpstart your portfolio. You're young, focus on a great tangible piece of real estate (think "niche: market, property, location"); let time and the market do it's thing as it always does (historically goes UP); and save on rent/build equity so you can move out of the house-hack purchase, and onto the second, then third, fourth and so on. Get rich slowly my mentor always told me... Read that again. 

I was in your same position, and now work full-time as a Realtor with new investors & house-hackers those looking to leverage my experience and do what I did. Happy to chat further and share my story/house-hacking experience. Feel free to shoot me a call or a DM so we can find time to connect. 732-439-4364. Cheers.

FHA 203k one of the most powerful loan options out there! My advice, find yourself an agent and lender who has done these loans before. They can guide you and also go to bat for you pitching it to the listing agent. It's always a plus. Period.

I've closed a bunch of 203ks these last few years with clients. Never had an issue getting them accepted over cash or any other offer. Sure, my track record doing a 203k myself and with multiple clients helped present the 'complex' unknown loan to the listing agent. End of the day however, it came down to being the smart investor for myself and my clients. What do I mean?

Well, let's break it down. Who's buying majority FHA 203k worthy 'rehab' deals? Honestly, mostly investors with cash or first time homebuyers rather new investor looking to take a big bite on their first investment purchase (with some training wheels as I like to say) and swing for the fences. Besides cash or investor + construction loan, it's not your everyday forever dream home buyer, barriers to entry are low (especially for MFs).. My point? As an investor, I knew for my 203k purchase and most of my clients a) what to say to the listing agent (how's this a win-win?) and b) what the other cash investor was offering aka how to have a truly competitive advantage... Thus, I knew how to beat them, and make it a win-win for both sides of the transaction, my experience and pitch to the listing agent was always just reassurance.

Even your newbie investor knows that less down = higher ROI. Do you know where that cash investor needs to be for this deal to work? Do you know what that investor wants in your market? What's their goals? What's market cap/return they're seeking? Ask yourself these questions... I can tell you most cash buyers in my market want quick returns, money in money out... They don't want to waste time renovating cosmetics AND mechanicals in an already high balance market unless they can see that CASH soon. Most who hold that type of cash aren't even long-term buy & hold like majority BP pool. Some deals just don't make sense for them. Period. Well... if not them then WHO ??

When you understand this you realize the leverage you never knew you had. Regardless of the seller or buyers market... All fluff. FHA 203k deals are not for the faint of heart but if you are up for it and know what to looks for and have the team who's been there to guide and advise you... Game over. Even more so now, in a cooling market when most of your investor competition gone fishin' and MIA thanks to current interest rate environment, and majority value-add multifamily's seeing higher DOMs and more leverage & negotiation power for your only (203k) buyer willing to step up to the plate :-)

@Victor Han Yes, you have a capital improvements allowance, Weehawken will allow you to increase rent X% per X dollar you put into the renovation. I forgot what the specs were but this is your average investors #1 way to increase rents. As owner occupant though, you can reset or decontrol rent after 2 years of living inside the property. That is a game changer and super “light” value-add opportunity for anyone who can afford a multifamily in an appreciation market like Weehawken or Hoboken, which has similar rent ordinances. Just by living there you can get rents up and in turn property value up with little to no effort. Couple that with some cosmetic updates and modern renovations and you’re golden.

Rent control varies by municipality but generally speaking, rent increases mirror CPI index, and water & tax surcharges, along with those capital improvement allowances. Hoboken ordinance permits 25% increase on legal rents if the tenant moves out after a minimum 3 years of staying. Part of me things Weehawken allows something similar but I would call the rent board and confirm. Make sure you submit a legal rent calculation with any offer or request it during attorney review so you see where legal base rents are currently. I’ve requested them a few times these past few months in Weehawken and Hoboken-- you’d be surprised how much base rents rose monthly per inflation/CPI index and water/tax surcharges alone.

Regarding tenants, everything's negotiable. Buyers are starting to get their leverage and negotiation power back in this market. This is even more true now for 3-4Fams which are seeing higher days on market. That is because your only buyer's for 3-4Fams in Weehawken and surrounding area are primarily non-owner occ investors FHA buyer/house-hackers are priced out per FHA self-sufficiency test. But those investors are hesitant to buy per rising interest environment, and super patient for the right property because of the rent control/ordinances, in an appreciation market that already doesn't make much sense for them when it comes to cash flow. Low barriers to entry + cooling market heading into winter season = good time to snatch up a 3-4Fam deal. Happy to chat further. Hope that helps!

 Hi @Mike A. I do not believe the unit being delivered vacant changes much. You will have to start with previous registered rents for the 3Fam; however, you should be eligible for some type of increase on those registered rents. Non owner-occupied units and 3+ Family homes are subject to rent control in Weehawken w/ typical rent ordinance allowances from CPI index, water & property tax surcharges, capital improvement increases, etc. Hoboken allows 25% rent increases if the tenant moves out after 3+ year lease term, I believe Weehawken is the same. Make sure you request a legal rent calculation w. the rent board to see allowable increases/what new rents you can charge. Also, make sure you register your rents yearly; especially if using an LLC, the municipal will catch you.

Worth noting, if this is your primary residence you can reset rents to market value after two years of occupancy. This is huge and the ultimate value-add, especially in a market like Weehawken and Hoboken, which also allows you to decontrol rents. If you are not moving in, I’d highly consider it; even more so if the legal registered rents you find out are way below market. I have a client under contract who’s house-hack purchasing a 3Fam w/ bonus unit in Weehawken and doing this right now. This is an easy value-add, opportunity and great way to get rents up and in turn your property value up, with essentially little to no work. Hope this helps!

@Steven C. When I was prospecting two years ago, for my first 2Fam house-hack, I was renting in the Jersey City Heights neighborhood, looking for best “value” if you will. Simply put, it came down to Bayonne and Union City. settled on Bayonne however Union City was a close second. I see you recently purchased (congrats to you, keep buying); I am not sure how long you’ve been on the market. Union City going back the last few years post-Covid has been way more affordable, relatively speaking, compared to surrounding neighborhoods. And at the time when I was buying, everyone was running from UC.. I saw, at the time at least, UC was not a landlords friend. The rent control stipulations, the lack of permits driving growth, the City at the time at least being less pro-development (relative to surrounding neighborhoods at least) over tenant-friendly laws, etc. All of this causes priced to lag, and in most investors eyes deterred the city’s potential and growth. Yet at the time (and still today) I was all in. It’s all relative in RE… I was buying for the long term, and I knew it was the time to get in a market like this. Think Warren Buffets value-adding philosophy. Then apply it to RE investing. Union City was lagging for the obvious reasons— the municipal & city sucks, the mayor & people in office were too political blah blah blah… Whoever or whatever the reason was, at that moment they were going through growing pains; which we fixable, and can/will change in the future.. It was inevitable. The location is too good, you have to assume prices eventually will catchup to neighboring City’s. Fast forward today, I am seeing it all slowly come to fruition. I’m all in on Bayonne; the Communipaw neighborhood in Bergen Lafayette section of JC; small Weehawken section near downtown UC- Shippen St, Oak St & Highpoint Ave (these are my 3 favorite streets in Weehawken); the Heights either downtown walking distance to JSQ or uptown close to Washington Park and Congress St/Palisades; & last but not least that downtown UC (old “West Hoboken”) neighborhood- close Palisade Ave / 3rd st up to 29th St. It’s the real estate wave... The Heights is booming and look at the neighborhood and tangible RE itself—it’s nothing like the Hoboken or your Jersey City brownstones in Bergen Lafayette/Communipaw or Downtown, JC/Van Vorst + Hamilton Park. It’s the proximity to it all that is driving demand—Bergen County and GW Bridge, Lincoln Tunnel & Holland Tunnel, Congress Station & Hoboken, etc.. It’s in the center of it all relative to NJ— and of course NYC, which is the global international market us RE investors in Hudson County can thank, for the opportunity to make money in RE. Every market has it’s niche—even on the other end of the spectrum you have Bayonne w. that ‘suburban’ neighborhood ‘live close to the city but not right in it’ feel, which is different from most of Hudson County. Find that special “niche” market to invest in for the long term and its game over my friend.

Well done sir! Love to see local investors making it happen in this market. 

What's next? @Adam Scovill