There are plenty of homes that fit your house hacking in northern New Jersey criteria and budget. It all comes down to being realistic about your goals and narrowing down the specific town you would want to live in. As always your numbers are most important for the short and long term. When searching keep in mind that you don’t necessarily have to offer their asking price. Offer based on what numbers would work for you. No one said it will be an easy and quick painless process. Financial independence is never a flip of a switch. Don’t give up. Keep looking and you will find a deal that will work. NJ, particularly, is very difficult. It could take you six months to a year plus to find the one house hack that you close on.
Creative Ways to Find a House Hack in Northern NJ
- Craigslist or Facebook Marketplace
If you feel the MLS is not yielding the desired results due to too much competition and low inventory you can try to get a little flexible and creative ways to find your ideal house hack in different listing sites for northern New Jersey. Believe it or not, there are some great deals that are only be found on Craigslist or Facebook Marketplace. When looking on Facebook or Craigslist it is almost like finding a hidden gem since there are much fewer people constantly looking on those platforms for investment properties and most of the sellers want to avoid realtors and massive foot traffic on their property.
- Networking Locally at Meetups etc.
Networking is another way to score a deal. Going to your local meetups, reaching out to people in your area on bigger pockets, or even telling everyone what you are trying to do. It all increases your odds of finding a house hack by word of mouth. Flippers and Funders meetup taking place in West Orange, NJ is a great group to meet similar people who were in your shoes before or might know people selling or be sellers themselves. Another, Meetup in Northern New Jersey, which often focuses on House Hacking specifically is the New Jersey Real Estate Investing Happy Hour taking place in Little Falls, NJ. Each meetup offers a relaxing atmosphere of socializing with like-minded individuals.
- Reach Out to Rental Listings
Reaching out to rental listings is a direct way to find a property that is vacant and needs to make a profit since they could be 100% loss or 25% loss at that present time due to a vacancy and is a perfect situation for you to reach out to the owner, realtor, or property management company and simply ask, “I am interested in your property! Are you open to talking about selling it or discuss real estate investing? I am trying to buy a multifamily owner-occupied property.” The worst that happens is they either don’t reply or they say no. Odds are you will find like-minded people that were in your shoes a couple of years ago and would love to share their knowledge with you.
- For Sale By Owner
FSBO or AKA for sale by owner houses are great ways to circumvent realtor and get a quick deal under contract. They can be found by driving around and finding for sale by owner signs, labeled as such on Zillow or other house listing sites, on Craigslist or Facebook marketplace.
- Direct Mail or Cold Calling
direct mail or cold calling is hard to get responses and the trick behind it is to make the outreach very targeted. You can get creative about making them personalized and specific, especially when doing mailings such as taking a picture with you in it, mentioning why you would want the property, and putting specific numbers on the letter. Doing this the first step is to make a list that matches your goals and narrow criteria. You can build lists on different public data sources, some are free and some are not. One popular and very user-friendly one is called Batchleads or another is the NJ Assessment Records search where you can search by towns and see if the owner is living in the property when it was last bought, type of property it is, and how it is currently zoned.
- Driving For Dollars
Driving for dollars is essentially a fancy way of saying driving around for the purpose of making cold unsolicited offers to houses. It is a good way also to start your list for cold calling or direct mail. When driving around to look at regular properties or when getting to know the area look for neglected houses, houses that do not have their lawn cut, or houses with mail piling up. These are signs that a tenant lives there or no one at all and the current owner lives miles and miles away and wants to get the property off his hands completely to not deal with the “headache” anymore. Two sites and apps to find data on individual houses are Property Radar and Deal Machine.
House Hacking a 4-unit in Northern New Jersey
In some specific areas, it is just going to be tough to find 4 unit multifamilies especially in areas in Bergen County. On average in bergen county, there are only about 18 four-unit buildings sold in Bergen County a year, which is a very low supply and then results in high demand.
Even if you do find a 4 family in Bergen county (Fairview, Garfield, North Arlington, & Wallington, etc.), these towns aren’t the greatest due to flood zones, poor school systems, and other reasons. Expanding the geography search can increase your odds of attaining properties that pop up such as in the Teaneck & Bergenfield areas.
Some real estate investors strive to hit the 1% rule, which is hard to find in Northern NJ to house hack effectively. As an example, some 4 families on the MLS are only 4 one-bedroom units where the 1 bedrooms are hard to get rents high and have high turnover.
In comparison to duplexes, 4 units will have more demand for them and are most closely related to commercial real estate for management and “feel” when living in the property since most are 1 bed and 1 bath units. Duplexes, on the other hand, are more versatile for multigenerational families and investors alike to create similar demand, however, there are much more duplexes on the market so less competition.
House Hacking New Jersey Strategy
House prices in those areas are high in comparison to most states and are among the top 10 most expensive housing markets in the whole United States. To find more of a “bargain” you most likely need to find a fixer-upper house or figure out a unique way to do a value add opportunity (add basement unit, add attic unit, add an extra bedroom or bath, etc.). Furthermore, most of the time these houses will be older homes that will have some regular maintenance repairs cap-ex repairs annually plus the upfront work. It is safe to say you will need to be okay with an older home and to pick up a hammer for fixing little things around the property to make it worth it. Using cash on cash return is for determining cash flow which is the whole reason to invest. Appreciation is mainly a bonus incentive since it can’t be guaranteed or realized gain unless you sell or pull money out of the property. However, some investors do bet on appreciation because they believe it is better than leaving money in the bank. If you are buying a property base on the appreciation that is speculation because you are hoping over time the value will go up a tremendous amount.
House Hacking Northern NJ Financing
Besides value add and finding below-market deals, getting good financing strategies is key for successful house hacking nj strategy.
FHA Loans (Low Down Payment) Owner Occupied Home
Utilizing an FHA loan is an option especially if your goal is to be as leveraged as possible and pay more monthly. The downpayment is 3.5%, however, do keep in mind PMI (Private Mortgage Insurance) will need to be paid monthly as an additional fee. Another loan to look into would look into an FHA 203k loan, which allows you to buy a property that needs repair and the cost of the repair be wrapped into your mortgage. These types of mortgages are only applicable for primary residences and why the different forms of them are unique to owner-occupant investors. It is important to note, you can only have one FHA at a time, so it is strongly recommended to find the largest 3-4 family you can that have cash flows positive, do some fixing up and then refinance to a conventional 20% down loan.
FHA Loan VS. Conventional Loans
Nonetheless, Some sellers will be skeptical of FHA, so make sure you have enough documentation to prove you are choosing this loan because you are a savvy investor and not because you can’t come up with the 20%. Conventional loans are most common to use and will help to cash flow since you need to put down a minimum of 20%. There is also less red tape and hurdles to jump over as far as regulations are concerned when comparing it to FHA loans.
With how competitive the northern NJ housing market is all sellers will be most likely ranking cash buyers above all others, than conventional loans and then FHA loan buyers when comparing all their offers. This is due to loans falling through with spending time with inspections and appraisal contingencies since no seller wants to go through multiple buyers after a month or two of negotiations etc. Depending on the state of the property no banks or any type of loan company would want to provide money for it and would need to be just all-cash offers. As an investment it is always recommended to buy houses at a discount however sometimes these properties are at a discount price due to the condition of them and in northern NJ an all-cash offer would consist of typically $250,000 minimum. If this is the situation and you do not have the capital to buy an all-cash property it might make sense to look into hard money lenders and then do a refinance to a conventional loan when it is up to the bank’s standards.
House Hacking NJ Realtor
Throughout your journey, there will be a lot of houses viewed, walked away from, offers placed on and a couple might even get to attorney review. Having an experienced realtor who knows your local markets and knows what to look out for in a house hack makes a world of a difference. Shawn McEnteer, a realtor and house hacker in your local area of Northern NJ has a couple of podcasts he was featured on (Guest on the FI Team, The Ready Set Go Real Estate Podcast, and more) and has been house hacking/ involved in real estate since 2008 with a big handful of properties invested in. To learn more about your local house hacking market in Northern NJ check out his site to reach out and learn more about some local market tips.
In Conclusion
If house hacking and with a loan of 3.5-25% and it cash flows it is a score! Sometimes you have to adjust your plan, and take action, or you could figure this out on your own by crunching the number a few hundred times and spend the next couple of years waiting for a unicorn or a radical change in the market (which does happen from time to time). It all comes down to the numbers and occasionally bigger down payment can make things cashflow. Having other advantages such as: being a property manager, being a general contractor to do all the repairs yourself, etc. helps with saving money and making money too with your primary residence.
