New Investor: Seeking Duplex FHA Hack Guidance

[Kay K.]

Hey Everyone ,

I am looking to invest extra income in rental properties, I would appreciate any advice on the following...

Currently, I am seeking to puchase a duplex in a small town. Dispite the relatively smaller size of 7k residents it is a growing area and rentals are in demand.  

I am looking to make an offer on a 2 unit 2bd/1bath duplex. This duplex is in need of cosmetic repairs but otherwise in well maintained condition with a newer roof and windows. The duplex has a strong rental history and the rent is slightly below comparable rentals in the area. 

The initial idea was to use my preapproval to take a FHA loan on the duplex. Put down 10% to avoid PMI and live in one side of the duplex for at least a year. The other side's rent would cover mortgage, taxes, and business insurance.

My Questions

*If you plan on moving out and renting the other side in a year or two would it make more sense to do a traditional mortgage than to have to refinance?

Other Questions 

* In your experience is better to direct excess cash flow to paying off rental mortgages early or leveraging the extra cash for investment opportunities?

* I have been looking for a multi-family opportunity for 2 years and notice almost all are on the market for a long time. Do you see this reflected in your area,  is this due to a smaller pool of interested investors? 

* Any other advice for 1st time investors?

Thank you in advance for your time and feedback!

[Nick Riccio]

Hi Guys - Speaking as a lender and an investor/house hacker. There are programs that allow low DP (3-5%) that are conventional programs. These would still include MI, but you can remove once you reach 80% LTV. FHA MI will remain for the life of the loan.

Personally, I have started with FHA (typically more forgiving underwriting standards) and then I refinance after a year or so to a conventional product. Once you refinance out - you can acquire another property via FHA.

Hope this helps..