My plan was to buy a short sale with my FHA loan but it turns out to be a cash only deal. Not sure where to go from here...?

[Stephanie A.]

I am very new to all of this so forgive me if I sound silly.

I had an aquantance approach me and tell me that his house was going into foreclosure. My ears started ringing because I have been wanting to buy a rental property for passive income. I asked him if he had considered a short sale, he said yes and that the bank had already approved a short sale for someone else who was interested in it for $41K (it's a cute little townhouse in great condition) but the deal fell through and they never bought it. So long story short, he told me I can have it if I want it. GREAT! But, the kicker is it's a cash only deal. I have no cash. I got approved for an FHA loan (Iv'e never bought a property before) and was planning on using that.

Based on the comps I believe it to be worth close to $50k. I know exactly how much the association fee is (which he has paid to date), the taxes, insurance, how much the rents are going for in the neighborhood and i think this is a good deal. I'm just not sure where to take it from here and the clock is ticking because the foreclosure is moving forward. Any advice?

[Anson Young]

Originally posted by J Scott:

Keep in mind that even with an FHA loan, you wouldn't be allowed to rent the property out -- FHA is for owner occupants only.

Somehow I missed the most obvious....