Use my FTHB for a flip or rental property ?

[Donald Walker]

Ok, I’m cracking into this REI adventure and my main goal was to start flipping houses. I have a team and I have the knowledge on where to find a deal and how to run the numbers. The only thing that isn’t appealing to me is the percentage of the profit going to Uncle Sam, which I know is inevitable! But after splitting the profits 2 ways and paying the taxes, the numbers don’t look to hot.. I’m currently looking for houses and I plan on utilizing my FTHB for a 3.5% down payment and Staying in the house for the required 7 month so my question is, would it make more since financially to start with rental properties use the BRRRR strategy ? Or should I flip my first house and use the profit as the 20% down payment? Looking for advice for a successful jump start into my real estate empire!

[Heather Skowronsky]

With the BRRRR strategy you would avoid the tax implication because you would be refinancing out of the loan that you purchased the property with (most likely an FHA 203k or something along those lines, I'm assuming since you mentioned you'll be using your first time home buyer eligiblity) and not selling it. Just know that you will have mortgage insurance which will make your payment significantly higher than if you purchased with a conventional loan or refinanced into a conventional loan. With the FHA 203k loans (and the other similar loan programs they have with which you can finance distressed properties) you don't necessarily have to be a FTHB. You also don't need 20% down to obtain conventional financing either. There are 3% down conventional programs as well. Find a reputable lender that can tell you what they offer in your area!