FHA loan use for rentals/primary residence

[Jackson Vasey]

So I've done some research but I have a few questions regarding FHA loans. I currently am saving money for a downpayment(I don't own a home currently). I intend on purchasing a home then living in it for a year and then if I understand correctly I can then purchase another home using an FHA approved loan assuming I live in the new home for atleast a year. This would allow me to purchase a new property every year or 2, granted I'd have to live in that new home for atleast a year and that would allow me to rent out the old property. From my understanding this type of loan also applies to duplex's and even triplex's as long as I occupy one of the units for atleast a year. Any advice or input on other strategies would be appreciated. For reference I live in Central FL, I am 21 so I don't need to get a lot of properties fast using crazy risky methods or anything, also don't have any interest in buying larger properties with partners.

Thanks for any input 

[Zack Karp]

@Jackson Vasey this is called the BRRRR method. Buy, Rehab, Rent, Refi, Repeat. But here's the catch...you cannot have more than 1 FHA loan at a time (unless you relocate 100 miles away).

So if you buy with FHA and put 3.5% down, in order to refinance out of FHA into a Conventional loan, for a 2-unit it's 85% max LTV and 3-4 unit max 80% LTV. And that's if you refi as a primary residence, and starting a new 1-year clock. Otherwise if you refi as an investment property, it's 75% max LTV for a 2-4 unit.

Kind of changes things a bit, huh? So you would need to create anywhere from 11.5% - 21.5% equity in order to do the "Repeat" of this BRRRR method. Which is why the Rehab part is essential to this method working, because without forcing appreciation, it's pretty hard to gain that much equity in 1 year.

There is also another loan product called Home Possible which is a Conventional loan that allows 5% down on a 2-4 unit, as long as your income is below a certain cap (depends on geographical area of the property). The great thing about HP is that it allows you to buy another 1-2 properties with a low down payment in addition to FHA, as long as you can stay under the income cap.

The most critical thing to using any of these strategies is to align yourself with the right investor-friendly loan officer so that you don't get stuck. Without the right advice, you might have just gone and bought that first property with FHA, and then found out later that you couldn't just buy property #2 with FHA.

If you want to map out a strategy that pertains to your situation, I'm happy to discuss further, feel free to reach out.

Best of luck!