Financing a First Time Owner-Occupancy

[Zachary Schnautz]

Hey everybody,

Newbie investor here seeking some guidance. Like many here, I'd really like to get the ball rolling and purchase my first deal. Specifically, a 2-4 unit fixer upper I can fix up and rent out. I've worked in residential remodeling for the last 4-5 years, so most of the rehab I'm hoping to be able to accomplish with as much sweat equity as I can. Where I'm needing guidance the most is in terms of financing the initial purchase. I'm still talking to different lenders to get pre-approved and learning about loans but from my understanding there's not many loans for a low down 2-4 unit owner occupancy, especially for a property in enough of a disrepair for significant value add. The FHA loan is one that keeps being brought up, which I have a few concerns about. First of all it's sounding like FHA loans/appraisers can be sticklers about the physical condition of the property, which is counter intuitive to the goal of finding a property that's not in great condition. The other concern I have for 3-4 unit properties is the self sufficiency test. In my market (greater Seattle area, specifically Everett) it seems to be generally accepted by the REI scene that most properties just don't cash flow as well as they do in many other parts of the country. When it comes to self sufficiency and the supposed 25% vacancy factor FHA appraisers account for it seems like any given 3-4 unit could easily fail this test.

Unfortunately, given the price of properties in my market, I don't think I'll be able to come up with anything greater than 3.5% anytime soon. I did just pass my brokers exam and a looking for a firm to work with so being able to represent myself as the buyer will hopefully allow me to leverage my agent status to my advantage. I'm hoping to get some guidance or advice from anyone who has done the same or faced the same challenged and how they overcame them.

I'm still new to this world and don't have a deal under my belt so I have a lot to learn, so any input will surely help out!