FHA Buy and Hold Strategy

[Chris Nowlin]

I am just starting out and working on leaning the ins and outs of the real estate business. I have built myself a base plan and tweaked it about 100 times at this point. I spoke briefly with an agent about FHA loans and am curious to what other investors think about them.

In the long term, I'm sure I will eventually switch to conventional loans out right. However, as a young investor, I seem to see some advantages to taking advantage of the FHA system.

My plan is as follows:

Purchase my 1st home using a 30yr FHA loan. By significantly reducing the down payment I will also significantly reduce my cash investment. Although mortgage insurance would be an additional cost, it would be covered by the tenant.

Step 2 involves saving and refinancing. Any cash flow will be put back into the property with the intentions of refinancing as a conventional loan once the 20% mark can be obtained. As my savings build up, the amount needed to refinance will fall. Somewhere on the sliding scale should come a point where I have enough cash to refinance to a conventional loan, with much less that 20% of my own ever going into it, and purchasing #2 with another FHA loan. Repeating the process until I feel it will no longer benefit me.

Has anyone had any personal experience with this concept? Or, know anybody that has? I would love some feedback on the idea. 

Thanks everybody,

Chris