first time buyer strategy - outside investor

[Michael White]

Hi guys,

wondering about the viability of this strategy as a way to get onto the housing ladder and whether it is being done anywhere?

Where I live in LA, the barriers to entry for traditional home ownership are higher (20%) down. Of course you have the option to get FHA, but with that comes the upfront lump sum and the private mortgage insurance.

With regards to duplexes, instead of plumping for FHA, would it be possible to create a situation where an investor stumps up the money for a downpayment and then gets a pre-negotiated rate. For example.

Investor lends 100k for the purchase of a 500k duplex.

Homeowner lives in one property and rents out the second property for 1500 a month.

Pays the investor 834 a month (10,008 annually) and keeps the remaining 666 from the income property.

The investor is getting a 10% roi while the prospective owner is getting some income from the rental property, access to the housing market (and as such all of the associated tax benefits) and doesn't have to pay mortgage insurance.

Of course there would need to be some sort of security and the lender could have their name on the deed? There would also need to be an agreed time period for the investment (for example 5-10 years). After this time, the owner would have obtained enough equity to refinance and repay the investor.

Would appreciate people's thoughts?