Basic information on multifamily brownstone/townhouse

Echoing what Adam said. Our bank (First Republic) took partial rental income into account when it came to the mortgage we were offered. I would recommend, however, not depending on the rental income to be able to qualify for the mortgage, just as a matter of not courting too much risk. Don’t want to get in a bad situation (say you have a gas leak and it’s hard to resolve for months, and you can’t rent the apartment or live in the building yourself!) and jeapordize your ability to make good on your commitments. But we are on the conservative side when it comes to those types of decisions; your mileage may definitely vary!

notfromny

in General Discussion 6 years and 1 month ago

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TaylorJung | 6 years and 1 month ago

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Hi folks, I am thinking about buying a brownstone and living in part while renting out the other part. But I’ve never owned before, and therefore need some pretty rudimentary information on such questions as: how do banks take the potential rental income into account when determining how much they will lend for an endeavor like this? What are the rules around repurposing a single-family home as a two family home? (i.e. zoning & other permits required, etc) How are property taxes determined, and is it reasonable to assume that the property tax won’t rise more than say 5% each year?
If you’re able to point me in the direction of any resources on these questions, and others that I’ve no doubt failed to consider, I’d be grateful!

kevrob | 6 years and 1 month ago

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I’ll let others chime in on the bank stuff, but as for going from single fam to two fam: don’t. Just don’t. If you want to do it legally you have file all the work with the DOB ($$$$ plus time), change the cert of occupancy ($$$$ plus time), get new electric and gas service in ($$$$ plus nat grid isn’t even installing new meters right now—politics), plus like a dozen other things I haven’t even mentioned.

If this is your first go-round I highly (highly!) recommend you only consider buying a property that can be used for your plan largely as is with only cosmetic renovations.

RobertGMarvin

in General Discussion 6 years and 1 month ago

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In addition to the factors mentioned by ESCIV, if a house, like mine, is in an area zoned for single-family use a change to two family is virtually impossible (especially if there’s a one-family deed restriction).

chemosphere | 6 years and 1 month ago

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most banks calculate 75% of rental income towards your ability to pay the mortgage.
As above posters have noted, NYC makes it hard to change usage. Bad policy, really, especially in a housing shortage.
If you aren’t doing major renovations, your property taxes won’t go up that much – capped by the state to only rise 2%. Also terrible policy if you are trying to collect money from rich homeowners! but that’s the way it is.

resident2 | 6 years and 1 month ago

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If you want a two family; buy a two family. The cost & time involved in converting buildings is not worth it, especially for a first time home owner.
Banks typically will only lend on rental income if there is a tenant in place with a lease. They typically take 75% of the rental amount & add that to your income. And then lend based on the monthly mortgage, Real Estate taxes not exceeding 34- 38% of your combined gross income. All dependent on what other debt you have; car loans, school loans etc.
Talk to a mortgage Banker / Broker.
Plus the Bank wants to see that you still have reserves of cash after you have bought the house.
For a Bank to mortgage a house it must be in good livable condition.

krobertson

in General Discussion 6 years and 1 month ago

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Your mileage will vary on getting the rental income counted. Banks I spoke with before refused to count any rental income unless you were a professional property manager/investor, ie. you had multiple properties and rented them. Especially for something small like a 2 family, banks will be very reluctant to count any rental income. And if they do they will likely charge you the investor interest rates. I believe it has something to do with making it harder for them to securitize or resell the mortgage.

mozeeatupu | 6 years and 1 month ago

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Banks don’t consider rental income, just your job income and liquid assets.
Property tax caps are also null if changing C of O or doing extensive renovations.

adam_dahill | 6 years and 1 month ago

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There is some outdated information on this post. Some banks will count projected rental income from the other units that you are not residing in. Fannie Mae backed loans will use 75% of the market rents stated on the appraisal and add that to your gross monthly income. Here at Citizens Bank where I am a loan officer we will use 75% of the rents off the appraisal if vacant OR 75% of the lease if the property is coming with a tenant for both Fannie Mae and JUMBO portfolio loans. So if the market rent is $2,800 we will add $2,100 to your gross monthly qualifying income.

Adam Dahill
Producing Sales Manager
nmls #66099
Home Lending Solutions-Mortgage
125 Park Avenue
18th Floor
New York, NY 10017
Mobile 917-696-6010
adam.dahill@citizensbank.com
https://lo.citizensbank.com/adahill

dorkofwindsor | 6 years and 1 month ago

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Sorry for the brief hijack – Adam what is the current threshold (size) for a 2 fam mortgage to be conforming in NYC? I seem to remember it being around $875k~ish last decade and I was wondering if that had changed. TIA!