Buying a rental Property with a FHA Loan

[Brad Horner]

My brother and I want to buy our grandparent's home they will be downsizing and after looking at the numbers it would be a pretty good rental property. I am a homeowner already and he is not. Is it possible to do a FHA loan and rent the home out or is that a big no-no? We have looked into rental mortgages, and he doesn't have the cash to put up if we had to do the 20-25% down, but my understanding is if he uses an FHA loan the down payment would only be 3-5%. Has anyone done this, or could you recommend creative financing options? We talked about owner financing, but my grandparents need the cash to buy a smaller place. Their home is worth 350k and I have access through a HELOC to about 45K that i can leverage for the transaction. If you have any suggestions on how to structure the deal I would be all ears.