Buying a Multi-Family under market value for Rehab in Central NJ

[Jose R Carmona Garza]

hi All,

I've finally decided to invest in RE and I'd like to do the following using FHA:

* Buy a Multi-Family property under market value in Central NJ that requires some rehab. i'd prefer that the unit(s) for rent are in good condition so it can be rented ASAP. 

* Live in the unit that requires repairs and fix it during the first year. I'm not a handyman, so I'd be looking for contractors to fix the property.

*Starting the second year, look for the next property so all the units of the first one can be rented.

Based on that plan, I have the following questions:

• What do you think about this plan? any input is very welcome
• Is it possible to refinance an FHA loan after a year? can you cash out when refinance?
• Is it possible to sell the property after a year when FHA was used? Thinking about an exit plan or sell the property for extra money.

Any suggestion or question is very welcome.

[Logan Allec]

@Jose R Carmona Garza, one thing to keep in mind when looking for an FHA owner-occupied triplex or fourplex is that 85% of the market rents on all the units need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies. There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets.