How would you use an FHA loan to turn into cash flow, etc.

[Ralph E.]

How would you get cash flow, and sell for a profit, by using an FHA loan to acquire a 2-4 unit property?

I am trying to figure out how to make this work, as in, what I need to do to be able to make cash flow, and to later sell possibly, and to do it in time so I am not taxed higher.

[Gerald Harris]

1.  Find yourself a 4 unit property

2.  Live in it owner occupied for 12 months.  (i think its still at least 12)

3.  Beautify it!   Make it a great place to live.   fix it up to command top market rents

4.  Make sure you buy it so it cash flows positive into your pockets and you can live rent free.  

5.  Make sure you get something that is individually metered.   You want other to pay their own electric & water if you can help it

6.  after 12 months.   rent out the 4th unit and flip it.    

comparing units and their value is different than comparing single families and their values

If you can.  Something that may be more beneficial is to do a 1031 exchange with your equity.   here is a link on capital gains

http://www.biggerpockets.com/renewsblog/?s=1031

Take that equity and keep flipping it in other properties.  Soon you will have 7 figures before you know it!

[Matthew Hansen]

If I remember correctly, on an fha loan, you can only rent two units

[Aaron Mazzrillo]

You're looking to do an owner occupied deal so 2-4 units is really your best, if not only option. Otherwise, you're willing to commit loan fraud, and if you're willing to commit fraud, you might as well go all in and just rob a bank.

Stick to a 2-4 unit deal. Property management from prison doesn't sound like an easy task.

[Nicholas DeLouisa Jr]

@Gerald Harris,

Thanks for posting that info.  I have a question about the residency requirement.  What happens if you need to rehab before you move in?  For example, you buy a distressed four-plex and it is going to take two months to rehab before you can move in and rent out the other three apartments.  Does that two months come off the 12 month requirement?  I guess what I'm asking is, does the 12 month requirement start from the day you close, or the day you actually move in?

Thanks.

[Matthew Hansen]

it should be from date of purchase

[Nicholas DeLouisa Jr]

@Matthew Hansen,

Thanks.

[Ralph E.]

Thank you for all the replies!

[Patrick Britton]

"Does that two months come off the 12 month requirement? I guess what I'm asking is, does the 12 month requirement start from the day you close, or the day you actually move in?"

it would be the day you close. 

and as for FHA 2-4 unit, best is to get a 3-4 plex. FHA guidelines requires that 100% of PITI is covered by the rent of the other units. this makes you mortgage free (so to speak) by default.

[LOUIS LEATHERS]

Has anyone been able to find a cashflowing deal using an fha loan with 3.5% down? ..most of the deals i've come across even if the property is discounted you come out of pocket.