To Down BIG or Not to Down Big(... fha): Financing for Newbies

[Emil Pinlac]

Hello All - 

Quick Question for the Forum: 

Should a NEW investor proceed in purchasing a property based exclusively on the merits of the DEAL (Cashflows 200-300 per month, good CACR) even WITHOUT 15-20% down and without a rehab budget on a property? (Assuming they have great credit, and can qualify for an FHA of 3.5-5% down/ or utilize private money loans?)

OR.

Should a NEW investor instead exercise caution in purchasing a property UNTIL they have at least 15-20% down and additional funds for a rehab budget, regardless of the merits of the deal (so long that the deal cash flows). 

Keep in mind, this scenario is for newbies.Let's assume this is for a small (2-4) multifamily property in a HCOL area, and the investor was willing to house-hack. (I guess he/she has to, in order to qualify for better financing, right?). 


What are everyone's thoughts? 

[Twana Rasoul]

@Emil Pinlac If I'm understanding your question, I don't think one should buy a property that needs rehab if they only have enough for the down payment and not the rehab.  Also, I would recommend using your fha and saving the extra money for reserves unless you have a healthy amount that you want/can go conventional.  

I especially recommend the house hacking strategy in HCOL areas goin 2-4 units, of course in my area it is extremely difficult to make a 3-4 unit work for fha as the prices/rents don't allow you to meet self sufficiency test.  I've seen a few properties get close but only because rates have gotten so darn low recently.

Best of luck!