How First-Time Buyers Can House Hack a 2–4 Unit Property With Just 3.5% Down | Jordan Podos

Jordan Podos (00:00)

There’s essentially two different approaches that you could take to these things. You’re either going to have the borrower who is again going to occupy one of the two, three, or four units. And then again, they’re able to use 75% of the rental income for it. So for every $1,000 in rental income, they get to use $750 to supplement their overall income, which essentially increases their borrowing power. So again, it does potentially open them up to different properties.

Dylan Silver (01:59)

Hey folks, welcome back to the show. Today we’re joined by Jordan Podos, a mortgage loan officer in Monmouth County, New Jersey. Jordan, thanks for taking the time today.

Jordan Podos (02:09)

Thanks for having me here. I’m looking forward to chatting.

Dylan Silver (02:11)

What types of deals are coming across your desk these days?

Jordan Podos (02:16)

Well, honestly, I’m seeing a lot of people trying to get involved in multifamily properties, and they’re doing that both from a pure investment standpoint and then also people who are trying to have their primary property be in a multi-unit so that they could also use the income from the other unit or units. So I’ve been seeing a lot of that lately.

Dylan Silver (02:32)

Now, is that what we would consider a house hack where they’re living in one of the units, or is this where they’re buying a fourplex and renting all four doors out?

Jordan Podos (02:40)

Well, I’ve been seeing a lot more of the house hack situation, to be honest with you. It really is people who are trying to take advantage of the additional borrowing power that they get from the income from the other units. So it’s opening them up to different properties that wouldn’t necessarily be on their radar if they were just looking at a single family.

Dylan Silver (02:57)

Now, when we talk about a house hack in New Jersey specifically, I want to get a little bit granular here because I was curious about this when I first heard that this was true. But I’ve heard this from so many mortgage professionals that it’s sometimes easier—is this true—to get approved for a multi-unit property like a quadplex, duplex, or a triplex than it is a single-family home because you can use the income from the other doors as your income? Is that accurate?

Jordan Podos (03:27)

That’s correct. And there’s essentially two different approaches that you could take to these things. You’re either going to have the borrower who is again going to occupy one of the two, three, or four units. And then again, they’re able to use 75% of the rental income for it. So for every $1,000 in rental income, they get to use $750 to supplement their overall income, which essentially increases their borrowing power. So again, it does potentially open them up to different properties, areas, locations that wouldn’t be available to them.

From an investor side, there’s an entirely different loan program that’s available. It’s called DSCR, which stands for debt service coverage ratio. And essentially that entire loan program is based upon the fact that as long as you have what is a relatively significant down payment, 15% or 20% depending on circumstances, as long as the income that the property is going to generate will cover the mortgage payment, there’s not going to be any inquiries into your income. So ultimately, for people who are owning multiple properties, it’s a nice way to, as long as you have the money to get in, you’re kind of off to the races.

Dylan Silver (04:36)

Without maybe giving away all the gold here, but a nugget for our audience: for the first situation where someone is going to be living in one of the units here, can they use this income and then qualify for a traditional FHA loan and come with 3.5% down and still use the income from the other properties? Is that what I’m hearing?

Jordan Podos (04:57)

That’s 100% correct. You could definitely use it with an FHA loan, again minimum 3.5% down. And if you’re a first-time homebuyer, you could get into a conventional loan with 3% down using the same circumstances—again, utilizing the income from the other units to supplement your overall income.

Dylan Silver (05:13)

Now, I think a lot of people’s—and if I’m not being so cavalier here—a lot of first-time buyers may look at this and say, “Well, I’m having difficulty affording a single-family home. You’re telling me a quadplex or a duplex with more doors is going to be a potentially easier process.” Are the price points in line with a single-family home, or is it like if there are four units, it’s double the price of a single family?

Jordan Podos (05:36)

What I find with the pricing of the properties, it really is location, location, location. A lot of the people here in New Jersey who I’m dealing with who are looking at multi-units tend to be a little further north. Again, I’m in Monmouth County. They’re a little bit further north—there seems to be more opportunities there. But ultimately, the homes are priced appropriately. If they’re occupying the same footprint as a single-family and it’s just subdivided, it’s essentially in the same ballpark as a typical single-family home.

Dylan Silver (06:51)

That’s a huge advantage when we look at creative ways where folks can get into the on-ramp of homeownership. There are a lot of things that we hear for folks to get involved, and oftentimes it starts in a more transactional way, such as short-term rental arbitrage or wholesaling. But also house hacking seems to be—you’re in Jersey, but throughout the country and the Sunbelt, wherever you are—a way where folks are now getting into that on-ramp. Is there a demographic, or are these younger professionals who you see more inclined to do this, or is there no one specific set of person who might be interested in this type of deal?

Jordan Podos (07:32)

So in the house hacking situation, I’m seeing, honestly, a lot more first-time homebuyers exploring that because again, particularly here in New Jersey, the home prices are elevated. And even with the interest rates being what they are, homes are still going relatively quick and there’s still a lot of activity. And what I’m seeing is, again, these first-time homebuyers, they might be a little frustrated, or certainly those whose income is not as significant as they would hope in regards to what they could purchase, they see it as a means of unlocking, again, opportunities that wouldn’t have been there if they were going to be buying a single family. And I think because of that, they are open to pivoting a little bit because they recognize all of the various benefits.

Dylan Silver (08:17)

When we look at New Jersey as a whole, and you mentioned elevated price points in comparison to other markets in the country—just the land is more expensive, and again, location matters tremendously as far as pricing. I’m here now, I’m in North New Jersey these days. As someone who is a mortgage professional in this space in New Jersey, is the sentiment from mortgage professionals that folks are optimistic and feeling like there’s going to be, or there actively is, a lot of younger folks who are interested in purchasing in New Jersey? Or are there a lot of people who feel trapped out of the space and feeling like, “How can I afford an $800,000, $900,000, or million-dollar home that in many other markets would be a middle-class $400,000 or $500,000 home?”

Jordan Podos (09:05)

What I’ve been seeing is the people whose budgets aren’t quite in that $800,000 range, they’re just becoming a little bit more flexible with where they are looking in the state. But the age range of the first-time homebuyer continues to rise. But at the same time, that’s not necessarily an indication of people’s interest—it’s just that’s kind of where the market’s been at. At the higher price points, there are still first-time homebuyers there, but you’re seeing a lot more people involved in their second or third homes or things along those lines. And then also you still see a lot of people with high-income jobs that are leaving Manhattan or Northern New Jersey and coming south. So they’re still propping up the markets here in Monmouth County—even further south into Ocean—you’re still seeing some elevated prices because people are just essentially traveling further from Manhattan, and just to even the elevated prices here, they are lower than, let’s say, up in Bergen County. So it’s just they kind of slowly reduce as you’re traveling south through the state, but people are taking advantage of what they can wherever they can.

Dylan Silver (10:08)

I’ve felt that being out here is that there are more and more towns, including the town that I’m in right now, which are feeling like—I don’t know if commuter towns would be the right word—places where folks will commute maybe part-time, two days a week or less than that, where they may be home-based out of Monmouth County, but their job is in New York and they need to be there a percentage of the time. It feels like we’re going to see more of that, and it feels like the trend is that New Jersey as a whole may be a commuter state. Is that an unfair characterization?

Jordan Podos (10:42)

Well, I think there are two things to keep in mind. Obviously we have New York to our north, and we also have Philadelphia to our southwest. So there are two major cities that are pulling in commuters. But ever since the COVID pandemic and the proliferation of working from home, people are a little bit more flexible. So that’s giving them the opportunity to take advantage of the different areas of the state, even if they don’t necessarily want to leave New Jersey—New Jersey has quite a bit to offer. So you do see people potentially coming to Monmouth or Ocean County to be closer to the shore, or potentially going up to the northwest where it’s nice and quiet and you could get a lot of land and farmland and things along those lines. So New Jersey has something for everybody, and for those that are commuting, there are two major hubs to commute to and there’s a lot of different ways to do it.

Dylan Silver (11:24)

Is Monmouth County—does this have shoreline?

Jordan Podos (11:27)

It does. We start at Sandy Hook and we go all the way down to Manasquan.

Dylan Silver (11:31)

Okay, I was actually in Manasquan the other day. I’m trying to learn how to surf. It’s not too cold for this in Jersey! But one of the things that immediately comes to mind is, for those homes and a lot of amazing homes out there, are the majority of those people living in those homes year-round? Is this something where it’s unoccupied half of the year? What happens to those homes?

Jordan Podos (11:53)

Well, I think each town has its own unique feel. And the truth is there are so many different shore towns in Monmouth County as you work your way from north to south that the answer differs depending on which beach town you’re in. And the other thing to keep in mind is, even though the beach towns are right against the water, they are relatively small. There are a lot of interesting towns and small cities that are inland that are popular all year round.

Dylan Silver (12:18)

Yeah, that’s a great point. I was out there and I was looking in Manasquan specifically, and I’m seeing some homes that are right on the water. But then as you go just a little bit inland, you’re seeing what looks like a very suburban community where people are here year-round. And that got me thinking: what is the demographic of the folks that are there? Are these folks who are living there full-time or part-time? When you’re looking at a mortgage on those homes, I’m imagining those are some pretty pricey homes. Is that a different type of financing that goes into that? I’m imagining that’s different underwriting for sure.

Jordan Podos (12:53)

Well, the underwriting process ultimately is very similar across all mortgages. So unless, again, you’re exploring something unique like a DSCR loan, we’re still going to be looking at income documents, checking out your debt-to-income ratio, all the various things like that. So regardless, again, if that’s an FHA loan, a conventional loan, or a jumbo loan, we’re essentially taking all of the same steps, at least initially. When you get to a lot of the properties along the shore, as you were saying, the home prices really are elevated. So they tend to be in a jumbo product. Conforming loan limits are over $1.2 million at this point. So if you’re going to be getting a mortgage that’s more than that, that’s when you start to step into jumbo products. And again, it just comes with its own unique interest rates and things along those lines, but the overall process of getting you qualified is going to be very similar.

Dylan Silver (13:44)

When you’re looking at a jumbo product, can we get into the weeds here a little bit? What are typical down payments? You mentioned a higher interest rate, but if someone’s looking at a $2 million home, are they coming with 10% down? Is it 3.5%? What does it look like?

Jordan Podos (13:59)

Well, truly it’s a little all over the place. Typically you’re coming with at least 10% to 15% down. And as you can imagine, those folks who are getting into jumbo products tend to have strong financials—you’re not going to typically be getting into that product if you don’t. And there are also a lot of different things that we could use to qualify you. For those folks who are in those products, there are different ways to qualify income that we could use across all loans, but it tends to be a little more prevalent in those—something like asset depletion, where if you happen to be sitting on a significant amount of money in either investments or in checking accounts and whatnot, we could use that money to also derive income. So there are lots of different ways to look at and qualify people for those loans because essentially there’s more to get creative with, if you will.

Dylan Silver (14:45)

I want to pivot back to something you mentioned earlier: DSCR loans. I’ve had a number of different guests on the show here, from really what you could say more traditional real estate, working for banks or more traditional mortgages, to then kind of more investor-focused frontiers. And it feels like DSCR now has become the hot new product that every mortgage professional has access to. Do you feel this way as well?

Jordan Podos (15:12)

Well, it’s definitely a nice tool to have in your toolbelt. What I ultimately find is most people aren’t aware of it, or they were accustomed to either getting a traditional mortgage or hard money or whatever other methods that they were using to get their income for these purchases—most investors just aren’t aware of ultimately the ease of working with the product. Again, 20% is a relatively significant number, but if you’re able to come up with that 20% down payment, it’s really a very straightforward process and it’s also a nice way to just expand your portfolio.

Dylan Silver (15:45)

I want to ask you specifically about the folks who are taking out the DSCR loans here. When you’re looking at an investment portfolio, sometimes people say it can be challenging to own in the tri-state area, right? And to our neighbors to the north, I hear a lot of investors saying, in particular the five boroughs, it’s challenging for a lot of reasons—for regulation, for the eviction process if it has to go that route—but also for lenders. Lenders have maybe some level of trepidation about operating there. When we talk about New Jersey, though, does some of that sentiment maybe travel over state lines into New Jersey? Do you feel like investors sometimes are more keen to invest in maybe other areas? I don’t want to talk down on New Jersey, but do they have a level of concern about, “Well, what is the regulation here, and is this an investor-friendly state?”

Jordan Podos (16:34)

Well, what I’ve seen tends to be more town-specific. Once I’m able to really explain to an investor the benefits of the program, they’re open to it. It’s really just the type of investor you’re speaking with. So you either have those short-term investors who are doing things more fix-and-flip type of situation, or again, the long-term investors. So it’s just a very different conversation depending on who you’re chatting with.

Dylan Silver (16:56)

If we look at fix and flip specifically, I can imagine these acquisition prices are probably pretty high, and then you’re going to have costs that are incurred throughout the way. But at the same point in time, you also have a high sell price, and it’s not going to be listed most likely for very long. A majority, if I’m not mistaken, of New Jersey homes are pre-owned—they’re not new builds. For these fix and flip operators, is this a type of deal structure where someone like yourself will interface with them, or would they have to go to a hard money guy?

Jordan Podos (17:28)

Well, ultimately it tends to be on their timeframe. If it’s something where they’re going to be releasing relatively quickly after getting into the mortgage, it might not make sense to even explore a mortgage—a hard money situation might be just a faster in-and-out process. Ultimately, if they’re going to be working on the property for a handful of months, a mortgage makes a lot of sense. And typically I try and just get them into like a regular conventional loan. It gives them the most flexibility while keeping the payment as low as possible. So while they are performing the work on the property, their housing cost for that property is going to be as low as we can get it.

Dylan Silver (18:01)

I’ve heard this term more often now than previously: “slow flip,” where someone will rent out a property for a year or two years and then flip it, but they’re not intending to hold it for five years or even three years. This slow flip… I’ve also heard that there are traditional products that have the ability to add a rehab component to them. Are you familiar with this?

Jordan Podos (18:24)

Yeah, so essentially they’re called renovation loans. There is an FHA product and there is also a conventional product, and it’s really quite spectacular. It gives the purchaser the ability to buy the property and then also finance in any of the work that is going to be done on the property. And essentially the way it works is you have an architect or GC draw plans, we take an estimate so that we build that into your mortgage, and essentially you close on time just as you would with any other conventional or FHA loan—same timeframe and everything. And then there is essentially an escrow account that’s created, and the funds are distributed as the work is completed. It’s just a great way to finance. You could do it for things as small as wanting to paint the walls and sand the floors, or you could do it as big as wanting to add a new roof or a second level or something along those lines. So it’s quite flexible and really a very nice way, again, instead of financing it out of pocket after the fact, to get it at a lower interest rate. The only thing to keep in mind is you still have to qualify for that full amount like you would on any mortgage. So if you’re purchasing a home at $300,000 and you’re going to put in $100,000 worth of work, you would need to be able to qualify on that full amount—so $400,000 in that scenario.

Dylan Silver (19:46)

We’ve probably had hundreds or a couple hundred mortgage professionals on the show, and one of the things that I’m always curious about is how folks have grown their business. As a realtor, I certainly know that it’s not as simple as getting a license and deals start flowing in—you have to work your network. Some people are heavy with in-person networking and working their sphere, other people are heavy with digital marketing and even paid ads. What was your on-ramp like in that first year and a half with your license?

Jordan Podos (20:16)

Well, ultimately the rate environment my entire time being a lender really hasn’t been the most favorable regarding refinances. So the idea of working my sphere just wasn’t as applicable as it would be potentially at a different time. What I’ve personally done is a lot of networking within my sphere and beyond, trying to build relationships with various referral partners—with realtors, with financial advisors, with CPAs, folks along those lines. And then certainly just trying to see what I could do to help them elevate their business. On the other side, I’m trying to have a little bit more of a presence on social media. Certainly that is the plan to roll out as we continue our way through fall. I’ve recently launched a website to be both a good resource for referral partners and borrowers, so that’s out there as well. And then trying to get on podcasts and continue to do things like this just to keep getting my name out there.

Dylan Silver (21:08)

I’ve got a gripe with mortgage professionals, if I can say that in a kind way. One of the things that I’ve noticed—and this is me wearing my Texas hat, could be totally different in other markets—is you’ll see some mortgage professionals who are really willing to go to the mat for their clients and go the extra mile, try to get people approved. They’re following up, they’ll follow up for months and years. I’ve seen this, it’s incredible. Then you’ll also see folks who are looking for layups, it feels like. And it feels like they may have a lot of deals, but that could be because of their network. So you might send someone to someone who’s looking for a layup and they see it’s going to be a difficult approval, and then maybe doesn’t have that TLC and that long-term follow-up and continuity. Are there enough mortgage professionals that are willing to go to the mat for people and really kind of handhold people in some capacity to walk them through the process?

Jordan Podos (21:55)

You would hope so. I don’t have a good answer to that, to be honest with you. The one thing I do know is that there is no one sure way. At this point I have relationships with a lot of different mortgage professionals and we all go about our businesses slightly differently. There are some who do very well, there are some who aren’t, and there’s no rhyme or reason as to why one person has found success. I personally try to always educate my borrowers. Even if they’re seasoned investors, there’s still always a little bit of something that somebody could learn. And it’s always a situation, particularly with, let’s say, first-time homebuyers or people who this might be only their second purchase transaction: there’s a lot they don’t understand. I just try to always put myself in their shoes. I remember when I first purchased my home and went through this process, and how ultimately I didn’t really know what the heck was going on, honestly, it felt like the entire time, and I did not have the loan officer that was holding my hand. My realtor happened to be fantastic in that situation, but the loan officer kind of dropped the ball there. I do my best to always be in touch, stay informed, and if there are any changes in the loan products or process for whatever reason we need something, I’m on top of that. And then also it’s just speaking to somebody the way you and I are speaking right now. It is a very intricate process, and you certainly get to know some of the most secret details of somebody’s life in regards to their finances. I take that very seriously, and I just try and relate to people like they’re a friend of mine, because I want to treat people the way I would want to be treated.

Dylan Silver (23:22)

And anytime someone asks you for six months of bank statements, they’re going to learn everything about you, right? I started saying this jokingly, but semi-seriously: it’s like we’re giving the lenders six months of bank statements, we need to maybe see our friends’ bank statements or our family’s bank statements! We trust these people, right? You learn so much about somebody, and you even learn a lot about yourself when you fork over six months of bank statements. I want to talk about taxes, though, because when people think of a loan application process, they discover so much of it is based off of last year’s and the year before’s tax returns and an average of the two. There are a lot of folks who may not realize that. Once they start looking at this, they realize that they have to have maybe a different tax strategy, especially if they’re self-employed, to pay more taxes and to show more income. Can you talk to that a little bit here?

Jordan Podos (24:14)

Sure. Well, ultimately, when it comes to taxes, the biggest group of people that this affects is those who are self-employed or those who are freelancers. There are two different frames of thought. One is they are essentially having, potentially, very significant financial savings by using taxes and tax strategies to their advantage with their CPAs, so they’re saving a significant amount of money on that side. For those individuals, what I tend to do is… there’s something called non-QM loans. Other lenders have them as well, but we have various programs like bank statement programs or profit and loss statement programs that do not rely on what is reported on 1040 taxes. We are going to be doing a deep dive into 12 months worth of bank statements, we’re going to get that profit and loss statement, and we use those documents to then derive somebody’s true income, if you will, before it gets crazy with all the various deductions, and we qualify somebody on that. So that’s where I tend to see a lot of the self-employed or freelancers going in that direction when they’re trying to get a loan.

Dylan Silver (25:24)

Now, these bank statement loans—the interest rate is higher. I’ve heard 10%. Is that typically accurate?

Jordan Podos (25:30)

Well, the interest rate does tend to be higher than a conventional loan. It’s typically within a half a point to one point higher, depending on obviously various factors. But what I always mention to my borrowers is, again, even though you’re going to be paying that little bit more in your monthly mortgage payments, you’re still really reaping the savings of having to pay all those taxes. So the 1% higher that you’re going to have for your mortgage is worth the significant tax savings that a lot of these individuals are taking.

Dylan Silver (26:00)

Yeah, that’s substantially less of an impact than I had been told. I’m glad to know that here. When we look at all of what we’ve spoken about here today, even as I’m talking through it, it makes me realize just how complicated this is. And I’m a realtor, of course, but even still it’s complicated to me. Every time that I would have to go and purchase a home for myself, this would still nonetheless be challenging. Do you find that people, even seasoned professionals, are sometimes surprised how complicated this can be?

Jordan Podos (26:30)

Well, I think everybody underestimates what goes into this. Again, I don’t issue a pre-qualification—I jump right to the pre-approval stage. So initially I’m already asking for a lot of documents upfront. We get your accepted offer, we’re going to get this loan moving, my processors are going to get involved, and we’re going to ask for a significantly more amount of documents and do an even deeper dive. So I think people’s eyes aren’t necessarily open to that aspect of things. Ultimately, on every initial conversation I have with somebody, I try and discuss what the potential timeframe is, not only for the pre-approval phase, but also once we get that accepted offer, what the rest of that timeline looks like—just so that there’s nothing that pops up or takes longer than they anticipated, or vice versa. And the other thing that I always say to my borrowers is: even though this is a lengthy process and we’re going to be requesting a lot of documents, the faster you’re able to work, the faster we’re able to work. So it’s very much a “help me help you” type of situation, and we form this symbiotic relationship just to get the thing across the table.

Dylan Silver (27:36)

We are coming up on time here, Jordan. Any new projects or activities that you’re working on these days? Also, anything you’d like to mention directly to our audience?

Jordan Podos (28:28)

Ultimately, today is always the best time to get involved in the market. While interest rates do fluctuate—and right now they are a little bit elevated compared to where they’ve been recently—today is still the best time because you’re going to take advantage immediately of the appreciation that you’re getting in your home. So that’s something that I always try to mention to my borrowers. Personally, I recently launched a website, so I would love to share it with everybody: it’s called JordanPodosMortgages.com. It has great resources both for buyers and investors, as well as agents. So check it out—there’s a lot of great information on there regarding blogs, social media, and various tools and calculators. It’s a great thing to have in your pocket.

Dylan Silver (29:11)

Jordan, thank you so much for joining us today. Thanks for your time.

Jordan Podos (29:14)

Thank you very much.