First FHA loan Duplex Hack - what’s next?

[Brad Reiner]

Hello,

I finally purchased my first duplex using a 3.5% down FHA loan. I'll be living in one unit, having a roommate paying me rent in my personal unit, and also renting out the other unit. I'll be profiting a few hundred dollars after paying the entirety of the house payment and when I eventually move out in a year, the property should cash flow nicely with both units rented out.

I'm curious for ideas on how to acquire my next house hack with as little money down as I can get away with since the goal is to buy a property a year from closing on this duplex I just purchased. I believe I could purchase an owner occupier single family home for 5% down and just get a bunch of roommates. I'm thinking anything multi family will require a minimum of 15% down. Not sure if 203k loans are considered FHA loans since I know they're intertwined, but if they're not, that could be a great option. Any ideas I'm missing? Curious what others have done in similar situations.

[Erik Browning]

Hey @Brad Reiner congrats on your purchase! Let me tell you what I look for in an investor client that is following this path from the lender's perspective. Many folks get the home and then make mistakes that prevent them from securing financing in the future, even if they have the cash to do so.

Here Goes:

1. Keep all receipts/invoices for your repairs so you can prove they are 1-Time costs. This will help your monthly income reported.

2. Get your roommate to sign a lease and make sure you have the lease for the existing tenant in the other unit. This helps for establishing history as a landlord.

3. Improve the property making smart, value-add upgrades that don't break the bank. Things that will increase the home's value.

4. Save as much cash as possible. Pack your lunch.

5. Refinance out of the FHA into a conventional loan as soon as it makes sense to do so. Talk with your broker about when it's a good time.

6. Really consider your income/expenses for your Schedule E on taxes this coming year. Do your best to show the property is making money and not suffering significant losses.

7. If you have a W2 job, make sure you're working 40 hours or more each week unless you go on vacation or get sick. Try to show predictable, stable income. Try to get promoted as well.

8. Embrace being a landlord. Deal with problems, understand how to talk to your tenants, fix problems as they come up, collect rent, provide adequate and thoughtful housing to your tenants. Give landlords a good name and take care of your property and your tenants.

9. Join investor groups, listen and absorb as much info as possible. In addition to the items above, you need to continue to learn. The experience you will gain as a landlord as well as positioning yourself financially will make you ready to strike at the next opportunity. Keep at it, learn about different ways to invest, and good luck!