New to property investing

[Brandon Ngo]

Hello everyone! I'm a recent high school graduate and currently working on obtaining my real estate license. I live in a slightly more expensive area (Salt Lake City) where a duplex may generally go for around 250k+ I was thinking about a first rental to be a duplex financed with a FHA loan to allow for a lower down payment of 3.5% because at my age a 20% down payment of 50k is not easy:/(not only that but renovation costs as well) I was hoping to live in the duplex for a year (to meet FHA rules) or two to qualify for tax free capital gains if I choose to sell within 5 years and to rent out both units after moving out. I was wondering if anyone else had similar situations and or ideas on how much the cashflow would be affected? Any advice is helpful! Thank you for taking the time to read!

[Jaysen Medhurst]

@Brandon Ngo and @Jared Maches any kind of residential mortgage requires that you live there. In most cases, for at least a year. The amount of DP doesn't make a difference. The reason those mortgages have the best terms are because they are intended for homeowners, no investors.

As far as PMI goes, it it depends on how the loan is written. Typically, it drops off when you hit 78-80% of purchase price. The lender sends a letter and tells you when that is, say 68 months into the term. If you are making extra payments, and therefore getting down to 80% LTC faster, you must formally write the lender and request that PMI be removed once you hit the target. Lastly, some mortgages (including my primary) don't allow you to remove PMI due to appreciation alone. They use the lesser of purchase price OR appraisal. In that case, the only way to get rid of PMI is to pay down the loan faster or refi based on a new appraisal.