Challenges to buying a new primary residence every year

[Ryan Cleary]

I hear all the time that an easy way to slowly build your portfolio is to buy a new primary residence property every year with a low down payment, live in it for a year and then rent it out. However, I see multiple hurdles with this method. First, you can only have one FHA loan at a time and it seems as though they are cracking down on giving mortgages to investors to build their portfolios. So that leaves you to rely on conventional mortgages which require a minimum of 15% down for a multifamily (not the end of the world but not as nice as 3.5%). Secondly, in this market, if you do start out with a low down payment, even in one year you are probably still going to be negative cash flow even with some value added.

I will provide my scenario, I purchased a 2-family property last year with an FHA loan. This year I am buying a single-family home at 5% down since I am restricted to using a conventional mortgage. I am getting hurdles from underwriting and they want to consider my loan a rental property unless I can provide valid reasons why I am moving. This really isn't too big of a deal but this begs the question. If this is my second year doing this... how will this process go next year if I try again?

Curious if anyone else shares these concerns or has solutions.