FHA Loan for a SECOND Duplex...with some caveats

[Matt Z.]

Hi All,

Posting this in light of the BP article sent out today "An FHA-Financed Duplex is an Ideal First Investment Property: Here's Why"

So I already have one duplex. Purchased January 2016, didn't want FHA financing because of the potential restrictions. But now I'm looking for my second. Will have a year and a half of landlording experience by the time that happens, and 2 signed leases through Summer 2018.

I did a significant value-add and renovation to my first property, and am planning on 1) Doing a cash-out refi with minimum 20% equity remaining (this is in progress right now), and 2) Renting out both units, including the one that I currently owner occupy, and purchasing a second multi-family home.

I live in a hard area to appraise, because sales of decent, or great (mine is great) duplexes are so rare.  They cash flow like crazy, so people hold the houses unless they're falling apart. Thus, the comps are crap-boxes in need of massive investment.  Tough to comp against my turn-key house, so I'm preparing myself for a pessimistic appraisal.  Less cash-out = less down payment on another multi-family.

Notes:

- I would owner-occupy the new duplex, at least for a year. Possibly many more years, but it's tough to say for certain.  For the sake of conversation, lets say I can only guarantee 1 year of owner occupancy.

- A particular "duplex" Im looking at is actually a legal triplex, but missing a kitchen thus is being sold as a duplex. Would immediately be pulling building permits to return to a triplex. Meticulously maintained and updated home that I don't see having an issue passing FHA requirements.

How does FHA financing fit into this, if at all?