Buying a two- to four-unit property in New Jersey

Financing when you live in one unit

Some government-backed loans can be used for a two- to four-unit building when you will live there. HUD's basic FHA program, Section 203(b), insures loans to purchase or refinance a principal residence, and eligible properties are one-to-four unit structures. VA home loans can be used to buy a home of up to 4 units, as long as you will live in the home you are buying.

Lenders set their own rules for things like how rental income from the other units is counted, so ask early. Cathy's preferred lender is Bradley Brondt, Branch Manager (NMLS 242550), The Brondt Cook Group at Acre Mortgage and Financial, Inc. in Cherry Hill. You're free to choose your own lender.

Confirm the legal unit count with the town

New Jersey's Municipal Land Use Law gives each municipality the power to zone. A use that is not permitted in the zone, or a density above the maximum permitted, generally requires a use variance from the zoning board of adjustment. That is why the number of units a listing describes and the number the town recognizes are not always the same.

Before you rely on rent from every unit, ask the municipal zoning office to confirm the permitted use and number of dwelling units for the property, and compare that with the certificate of occupancy and any past zoning board approvals.

Registration and inspections: two units versus three or more

If you do not live in a two-family home you rent out, the owner files a landlord registration statement with the municipal clerk. An owner-occupied two-family home does not need to be registered.

At three or more units, the building is a multiple dwelling under the New Jersey Hotel and Multiple Dwelling Law. It must be registered with the Bureau of Housing Inspection in the Department of Community Affairs (DCA), it must meet the state's maintenance regulations, and the Bureau inspects it on a cycle. A new owner registers with the Bureau after taking ownership; DCA's instructions say within 20 days.

Many towns also require a rental inspection and certificate when tenants change. In Cherry Hill, for example, tenants may not move in until the housing inspector issues a certificate of occupancy. Check the rules in the town where the building sits.

Lead-based paint and tenant rules

Under P.L. 2021, c.182, rental units in many pre-1978 two-family and multiple dwellings must be inspected for lead-based paint hazards every three years, or upon tenant turnover, whichever is earlier, unless an exemption applies. A lead-safe certificate is valid for two years.

Living in one unit changes some tenant rules. New Jersey's Anti-Eviction Act may not apply to an owner-occupied building with two or fewer rental units, and the Security Deposit Law has an exception for owner-occupied two- and three-family homes, though a tenant there may ask in writing for it to apply. Fair housing laws also shape how you advertise and choose tenants, so ask your attorney how they apply to your building. Here's what that means for you: whether you move in changes which rules you follow, so decide that before you write the offer.

How Cathy helps multi-family buyers

Cathy Walters has been a licensed New Jersey real estate professional since 2007 and offers acquisition guidance and portfolio development for new and experienced investors. She serves Burlington, Camden, Gloucester, Salem, Cumberland and Mercer counties.

Her concierge network includes real estate attorneys, inspectors, appraisers, contractors, CPAs, insurance professionals and mortgage professionals. She will help you connect the pieces between the lender, the town and the building, and her eye for design helps you see how each unit could work.

Before you buy a two- to four-unit property: what to check

• Ask the zoning office to confirm the permitted use and number of dwelling units.
• Compare the unit count with the certificate of occupancy and any zoning board approvals.
• Check whether the building is registered with the town or with DCA's Bureau of Housing Inspection.
• Ask for lead-safe or lead-free certificates for pre-1978 units.
• Ask which utilities are metered separately for each unit and which ones the owner pays.
• Review current leases and security deposits with your attorney during attorney review.
• Talk with your lender early about occupancy and how rental income is counted.