Financing second house hack

[Bryce Renicker]

Hi BP community, looking for some thoughts on how others have moved on to their second property after using an FHA loan on their first house hack.

I purchased my first property a 2 flat as a house hack in December (2021) using a FHA 3.5% down loan. I am looking to repeat the process ASAP in to a second 4 unit property, but am getting stuck with how to finance it. 

I could refinance my current property into a traditional mortgage so I can re-use the FHA loan on my next property, but Im not sure how that would work if I dont have a lot of equity in the property, and with mortgage rates going up I dont think I would be able to cash flow on the property after re-financing at a higher rate. 

I am saving as much money as possible to use the option of the traditional 15-20% down on my next property but with average 4 unit property prices well above 4-500K in my area, this could take many years to save up a down payment of this size. It is my understanding that conventional loans require at least 15% down on multi-units even while owner occupied. 

Any thoughts or advice or possibly alternate loan products would be greatly appreciated! 

[Ben Einspahr]

One of the main things to keep in mind when thinking about purchasing a tri-plex or quad to House Hack is the FHA self sufficiency test.

FHA self sufficiency test defined as: You need to prove that 75% of the rental income you're likely to receive will exceed the full monthly mortgage payment.

For Denver market, to make that work you will need to put more money down and by that point you might as well buy it as an investment property.