Building a portfolio.....Gaining Passive Income

[Carlton McDaniels]

Earlier this year I purchased my first rental property here in Chicago. My family and I stay in one of the units. Initially the plan was to stay here a year, then purchase our first home. But I'm actually eager to get a 3Flat and rent it out to gain more passive income. Any advice would be well appreciated. 

[Tom Cafarella]

My advice would be do this as long as you possibly can until you and your family can make the sacrifice. I own a bunch of rental units and my biggest mistake was not taking advantage of the FHA rules that allow you to continue to accumulate rental units.

If you do it the right way, you can use FHA programs to help you build your rental portfolio in the beginning a very little down payment. The key is that you have to Buy the max amount of units for your first purchase(4 units) and then subsequent purchases have to be equal or less units. You cannot go from a single family fha loan to a 4 family fha so if you are going to it start with a 4 and go from there.

If you continue to do it right you will be able to buy a bunch of mulit families with very little down and by the time you get to your 3rd or 4th multi, the original one that you bought will have a ton of equity that can then be pulled for future down payments. At that point, you wouldn't need to continue using FHA unless you wanted to/still qualified.

The more units that you can get using FHA the better. It is a sacrifice for sure at first, but the outcome is well worth it!