first property questions and FHA changes

[Stephen Underhill]

hello everyone,

first off, thank you for taking a minute to read my post and i appreciate any suggestions you choose to offer. This is my first actual post to BP! so to start off and briefly describe my situation, i am in the stage of education myself and learning as much as possible about RE. I have some outstanding debt that i am paying off in the coming months, then after a savings period to build up a cash sum to invest, plan on purchasing my first property.

Since that is a ways off, i want to sort out what path i want to take. I had originally planned to purchase a SFH or small multifamily, if possible, with a FHA loan (for low down payment), then rent out the other units for cash flow, but I did some brief reading into the changes for FHA pertaining to the MIP insurance now requiring payments for the full term of the loan, rather than just the first 5 years, and I am wondering if that would be a viable option in the long run, or if it would be better to save up 20% (which at my income currently would be rather difficult, as i am saving at about 1/1.25k a month after paying off debt.) Would refi after hitting 20% to tradtional loan prevent the extra expense of permanent MIP payments, or do you thing the interest rate will have gone up enough in that time frame to not be useful.

I am currently living with my dad and am only paying ~200/month( I am 21, forgot to mention, lol), but thats actually because he and my grandmother were both unemployed, so i moved in to help with expenses, (having been living in my own apartment before that), and their finances are now in order, hence my desire to move into my first purchase. My followup question is this, due to my increased expenses from moving out again, would it be smarter to find a cheap smaller apartment and rent out all units in the property to provide better cashflow. My job would allow me to pay for all the costs of ownership even if i was living in one of the units, leaving the other to pay for upkeep (using 50% rule, and would still leave roughly 100-150 in positive cashflow if i am paying for mortgage... however if i could find cheaper housing, i could rent both units, and have slightly higher cashflow, but then being able to use my salary to continue saving for a second property.

I understand that patience is key, however, if i choose to invest in RE, i dont want to wait for several years before I am able to get a second property and start so see some useful profits. I like the idea of living in the property and renting out the rest, however unless i were to find a very good deal on a triplex, or somehow effectively and consistently rent out a SFH with several bedrooms, I am finding that cash flow would be <$200 a month if i live there, yet if i could find a cheap enough apartment, at least temporarily, the increase cashflow would offset the my living expenses (paid solely by my salary) and result in double the cash flow for the property.

anyway sorry to ramble on, i just started most of my interest and research in the last month, so i was a little nervous for my first post :) thanks again for your thoughts everyone!!!

p.s. a little about my market, since that would be useful for more specific responses. I live in Lafayette, Indiana, and am near Purdue University, ~40,000 students, so SFH could be more easily rented to well screened tenants if property is near enough campus. SFH with 3/5 bedrooms are reasonably available for between 50-85K, however actual duplex etc properties are limited and in the 90-130k range) with 2br's going at 600-700 in rent and 3br going at 750-850