Is Cash Flow Possible Via FHA ?

[Robert Zuccaro]

Hi Everyone,

I'm recently qualified to obtain an FHA loan up to 450k for a 3-4 unit multi-family property. As of now I'm working with my junior realtor (close friend & new to the industry) to source a property where the rent income will be able to cover debt service and operating expenses all while living in one of the units (therefore, removing the rental income of that unit from the equation). As of now, I've strictly been analyzing deals that my realtor sends me on the MLS. This has proven ineffective as most of these properties' income can barely sustain themselves [even with a "larger" (20%-30%) amount of equity down] and the ones that do have worse returns and higher risk than if you were to put money into a CD, for example.

With this said, it's looking less and less possible to go the FHA route and have the following possible conclusions:

• Multifamily property values are reaching their peek (at least in my prospective markets; surrounding the Chicago MSA)
• Investment properties on the MLS suck (lack of a better word)
• Finding a property that works via FHA route is a diamond in the rough

Overall, what do you guys think or recommend? Are multifamily values peeking? Is the FHA route near impossible? Is it just the market I'm in? Should I try and source off-market deals instead? (if so, does anyone have any strategies for this other than driving around and sending them direct mail letters)

Any input is greatly appreciated.

-Rob