FHA financing on owner-occupied fourplex (second investment)

[Corbin Jones]

Hello,

I have a few questions regarding using an FHA loan to finance on a fourplex. I've read plenty of blogs about the benefits of FHA & conventional financing to house-hack and owner-occupy properties. I currently have a single-family unit in Milwaukee, but I would like to house-hack a fourplex soon through an FHA loan. I have a W2 job that supplies me with $65K per year, and my current rental unit supplies me with $9K in gross rent per year. I have zero consumer debt and no car payments, as I have a company vehicle.

1. When applying for FHA financing on a fourplex (or duplex/triplex), how can I utilize the gross rent in the actual qualification? What if the fourplex is currently vacant? If there are tenants, can I use those rents as qualifying income toward my qualification? How does this part of qualifying work?

2. How can I figure out how much I'll be able to qualify for? I would like to get a rough idea before I go and take a hard hit on my credit from a bank.

3. Where is the best place to locate multifamily units? I love Trulia and Zillow, but it seems difficult to find good units on that site. I have checked out Loopnet a little bit.

4. What is a solid cap rate for fourplex investments? 7% - 9%?

I look forward to your feedback, and let me know if there is anything else that I may have not asked about!

[Daniel Gonzalez]

@Corbin Jones

1. When I was searching for a property to househack, I looked at 2-4 unit properties. The lender will do a self-sustainability test to see if the rents from the other units would cover the note. Keep in mind this only applies to triplexes and fourplexes. The appraiser they send to do this test, in my experience, had no local knowledge and just looked at the first comps they found. They don't take into account any reno you might do. If the property is occupied they use the current rents. 

2. As others have mentioned speak to a lender. They can get some financial info from you and give you a general idea without having to run your credit. 

3. Use BP to find a realtor you want to work with, the realtor I used to close on my property is great and I highly recommend him. @Vaughn Smith If you're serious about finding an investment property he is awesome. 

4. Use BP, go to REI meetings, or ask a realtor. Even though jersey isn't the biggest it does vary in different parts of the state. Of course, that's my experience when I was analyzing properties. Cap rates can be everywhere. I focused more on cash flow and ROI as my main metrics.

Good luck