Fha loan, should I look for a SFH or multi-family to start?

Question

Hi, I’m 22 years of age. I’m looking to get a Fha loan to purchase a home. I currently have 25k saved. 15 co-signer , 10k me. My aunt has always wanted to get into real estate investing and in short, she will be with me along the way. My question is, should I purchase a townhome, that’s move in ready? Or should I get a house that can have some value added? My goal is to rent it out after a year of living there .

Louis Jeffries · Answer

Hi Jordan, as a Real Estate Investor, the cheapest way to get started is an FHA loan. Even consider a FHA 203k loan where you will buy (hopefully below market) rehab the property increasing value an equity, then rent it out. The property type I would suggest is a 4 unit property, which if purchased right can good cash flow and you can live rent free.

You will not be able to buy investment property with only 3.5% to 5% down with such a low interest rate. This gives you the most return on your real estate investment dollar.

Now if you are looking to flip the property a good single family may work well but FHA requires you to live in the property. Many people starting out will buy a home live in it for a while and then sell once property has appreciated. The 4 unit will give you appreciation and cash flow.

Your Choice.

When buying a home to live in we have different goals than buying one for investment purposes. Therefore, you must be clear on your goals.

Tom Hacku · Answer

@Jordan Thompson My thoughts are to first look at getting a good real estate agent that can help you find a property that is priced under value, whether on market or off market. It sounds like single family is the easier to find option in your area, which is perfectly fine. From there you can see if your realtor knows a good lender that can give you some good options on financing. For example, when I bought my first home in TX we did 3.5% down conventional. On our new house in VA, we're doing 5% down. But see if there's any first time homebuyer programs in WV. While I have not done FHA, from what I hear is that there is a lot more red tape involved especially with the 203k but you can definitely make it work like some of the others on this thread. Keep in mind any eviction challenges with an FHA loan though. Once you get the property, add value (bathrooms, kitchens - new paint can go a long way) and do the live in flip after a year or feel out the house hacking strategy along the way. The lessons I learned from my live in flip were invaluable. Just remember that your first deal isn't going to be what makes or breaks you, but the ability to take action is

Jimmy Hodges · Answer

@Jordan Thompson you can absolutely do that. It's called house hacking and there are lots of discussions about it here on BP. I know two people here in AZ that are doing just that right now. It's a fantastic way to start. I am actually waiting for my daughter to finish college in December and once her lease expires partner with her to get a property where she can be the owner occupant and I will be the money and help manage. She is in the medical field and we are looking at renting rooms to some of her single colleges and/or traveling nurses. It will be the best way to get her started and to help keep her expenses down. After a year we will repeat and add a second property to her portfolio.

Matt Hassler · Answer

@Jordan Thompson

You are correct that there are not many residential multi-family in Martinsburg, most available MF are 6+ on Queen St. Have you considered areas other than Martinsburg? There have been a few duplexes listed in Inwood/Bunkerhill recently.

In regards to renting out rooms of a SFH, I am sure there is a market for this, but I do not know the quality of tenant nor demand for this in the area. I’m currently under contract on a home in Martinsburg that will be rented this way (8bd), and the vacancy/turnover has been a major concern of mine.

I’d be happy to connect further and provide any information that I know, I’m still relatively new at investing myself

Jimmy Hodges · Answer

@Jordan Thompson In the area that you live what will $25k get you? If it were me and I was looking to move in to the place (owner occupied) then I would look to see if I could pickup a small multifamily duplex, triplex or four-plex with part of the $25k saving the rest for fix-up and cash reserves. My goal here would be to rent out the other unit(s) in the hopes of covering most if not all of the mortgage while doing a live in fix and repeating the process with the other units as tenants move. After all the units are fixed up you could then repeat the whole process with a second small multifamily deal. If that doesn't work for your area and budget then I would look at house hacking a single family place with as many bedrooms as you can afford and do the same live in fix strategy. Either way you want to by a property under market which means it will need some work so that you can get the most out of it.

There are a lot of assumptions here like, you are handy and can do some of the rehab work yourself, or you have enough cash to hire out repairs, the area is a good rental market, etc. But as @Louis Jeffries stated, "When buying a home to live in we have different goals than buying one for investment purposes. Therefore, you must be clear on your goals." So what are your goals?

Courtney Jones · Answer

@Louis Jeffries I agree.   @Jordan Thompson If your purpose is to get the most you can, I would opt for a muti family. I am currently doing that fHA 203 K. I have to stay here a year. It will take me that long to get everything just the way I want it. I have 3 units rented. When my year is up, I will rent the  4th unit I am in also and move on to the next.  This provides lower down payment and more money for cushion and repairs and the next project.

Jordan Thompson · Answer

@Tom Hacku yes definitely, there are a lot of new constructions home and apartments being built by the developers and bigger money. Buying now a SF to live and add value right now, then in a year rent out completely will hopefully be my start to building wealth.

Jordan Thompson · Answer

@Matt Hassler I would really appreciate that! I’ve sent and request, hopefully we can connect and sit and I can run some questions by you as a fellow investor doing the same in my area.

Courtney Jones · Answer

@Jordan Thompson, yes Jordan, I agree with what Jimmy Hodges said.! Best of luck.

Jordan Thompson · Answer

@Courtney Jones

Thank you for taking the time out and replying!

There are currently not much , if at all multi family’s in my area for sale. All new developers are taking over land and building them. do you think getting a fha loan and buying a sfh and renting out rooms while I stay there all while fixing it up would be a good financial idea in the long run?

Fha loan, should I look for a SFH or multi-family to start?

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