FHA Strategy - Losing to cash offers

[Steven Barr]

We are trying to buy our first rental but keep losing to all cash offers on the sub $400k houses.

We have decided the best course of action now would be to go to Ribbon and pay the 1% fee to get cash for a cash offer. Then, we would finance with a 3.5% down FHA loan. From there, we plan to raise rents and get an appraisal to increase value of the property to give us 80% LTV and then refinance to a conventional mortgage to qualify for a 1031 exchange into our next property (if appraisal didn't give us quite 80% LTV, we would just put more of our own cash in to get us there)

Experienced investors…. Is this a good/viable strategy? If not, what should we consider doing to start winning deals?

Thanks so much!

[Matt Williams]

Quote from @Steven Barr:

We are trying to buy our first rental but keep losing to all cash offers on the sub $400k houses.

We have decided the best course of action now would be to go to Ribbon and pay the 1% fee to get cash for a cash offer. Then, we would finance with a 3.5% down FHA loan. From there, we plan to raise rents and get an appraisal to increase value of the property to give us 80% LTV and then refinance to a conventional mortgage to qualify for a 1031 exchange into our next property (if appraisal didn't give us quite 80% LTV, we would just put more of our own cash in to get us there)

Experienced investors…. Is this a good/viable strategy? If not, what should we consider doing to start winning deals?

Thanks so much!

If you're going to have 20% in equity do yourself a favor and go conventional then you don't have to pay the mortgage insurance. Also, that strategy can work if you get something with value add, however small multi are going to go off of comps and not likely CAP rate, I ran into this issue with a refinance. It can be done, however make sure you can add value to the property not just increase rents. It would be helpful to have comps around the area so you can estimate approximately how much you can pay and get equity with some improvements.

Best Of luck.

Matt