Buying multiple rental properties at once.

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Hello BP,

I am pre-approved with $200k max FHA loan because I only make $2600 monthly income from my 9 to 5 job putting my mortgage payment at about 50% of my monthly income. I have $20k in savings. I am thinking of buying owner occupied duplex or 4plex and house hack putting down 3.5%. It's been really hard to find a duplex/4plex that meets the 1% rule in the city I want to live in with my family (our jobs and school are in this city). I started thinking about buying investment property that meets the 1% rule in other cities in my state since my $20k savings can buy a $80k-$90k house with 20% down and I will rent a house to live in with my family in the city I want to live in. Can I buy two $80-$90k rental properties with 80-10-10 loan? What can I do at this point to maximize my situation? Please share your experience. Thanks BP

[Erik W.]

I agree with @Nathan Gesner that you'll probably do better if you can find something in your area that meets at least the 1% rule.  Until recently, I wouldn't buy anything unless it met the 2% rule.  People say that's impossible.  No, not really.  It does take more time, but the payoff is better. 

$20K sounds like a lot until you own a 4-plex and three tenants decide to stop paying rent because that Govt puts a moratorium on evictions.  Not that a scenario like that would ever happen....oh, wait a minute.

Cash reserves are important, and so is sufficient cash flow.  Smaller residential property (< 8 units) that doesn't meet the 1% rule rarely manages to cash flow positive, especially if you're heavily leveraged.  Managing long-distance adds another layer of complexity.  My advice for beginners is to dig for diamonds in your own back yard.