How FHA Loans and AirBnB Can Work Together

[Jordan Spillers]

Does anyone have any thoughts on this? My state is NC, and obeying the law is important to me. 

Should I own the property for a year and then AirBnB it? 

OR 

Can I AirBnB the property with the FHA loan in place?

Thanks for starting the discussion! 😁

[Jon Puente]

Hey Jordan,

FHA only dictates that the owner has to live in the property to be eligible, meaning it has to be considered a primary residence. As long as you are living there, you could airbnb the home and make some money, rent by the room, etc...

What most people do is own the property for 12 months first, and then you can move out and do whatever you want with the property!

Great Question!

[Michael Baum]

Hey @Jordan Spillers, what @Jon Puente said is correct for the most part.

The one thing I would point out is that you can only have one FHA loan at a time. So you would want to refinance the property into a conventional if you want to take advantage of the FHA primary again.

You might want to think about buying a 4 plex with the FHA, living in one, LTR the other 3. Then move and refinance and do it again.

I have been thinking that this is an easier way to build up some equity and leverage for more properties in a shorter time.

Plus, it is SHORT TERM RENTING, not AirBNBing. AirBNB is a platform, STR is a legal description of what you are doing.

[Jordan Spillers]

Excellent thoughts. Thanks for sharing. So with FHA, I didn't realize you can get more than one! I thought it was a one-and-done deal. In that case, are there any stipulations to convert it to a conventional loan when refinancing? Thanks a ton for your thoughts!

[Michael Baum]

Hey @Jordan Spillers, here is a primer on refinancing FHA to conventional.

https://www.bankrate.com/mortg...

Most people use FHA for the low down. You will need 80% LTV in order to refi to a conventional.

[Erickson Sainval]

Quote from @Jon Puente:

Hey Jordan,

FHA only dictates that the owner has to live in the property to be eligible, meaning it has to be considered a primary residence. As long as you are living there, you could airbnb the home and make some money, rent by the room, etc...

What most people do is own the property for 12 months first, and then you can move out and do whatever you want with the property!

Great Question!

 I think put simply Jon answered best. You must occupy the home, and remain for one year. You can air bnb by the room during that time if you desire. Once that year is up, you can do as you please.

[Jeremy Albert]

Hey Jordan, I'll take a crack at this as well. 

I think unless you have VERY extenuating circumstances you are only allowed 1 FHA loan at a time. The circumvention is obviously refi out of the first then repeat. 99% of the public don't understand the strategy of this which is why misinformation spreads.

The thing I'm personally looking for confirmation on is whether or not you can airbnb the other units of a small multifamily when in the first year of FHA. My wife and I previously used FHA and I recall documents strangely mandating that we don't STR the other unit.

[Carlos Valencia]

Yes you can as long as you live there for 12 months you can house hack or STR. Common strategy investors use to get into first investment property with low down payment.

@Albert Bui

@Matthew Kwan

[Albert Bui]

Quote from @Jordan Spillers:

Excellent thoughts. Thanks for sharing. So with FHA, I didn't realize you can get more than one! I thought it was a one-and-done deal. In that case, are there any stipulations to convert it to a conventional loan when refinancing? Thanks a ton for your thoughts!

You can convert your current FHA loan to conventional (via payoff or refinance) or you can also attempt a 2nd FHA qualification which is allowed albeit through a few exceptions ( legal award/divorce, relocation for job, family size, or you were acosignor on someone elses FHA loan).

The 2nd FHA simultaneous exception is tougher to qualify for because you need 1 of the exceptions above and sometimes other FHA rules might apply like the 100 mile rule which is initiated when or IF you move out of a primary when trying to USE FHA to qualify for a "new," property.

The stipulation on the 100 mile rule just states that you cannot use rental income to help you offset your current primary while trying to use fha to qualify for a new property unless if the new property is 100+ miles away or if you relocated for employment/job relocation purposes.

Avoiding the 100 mile rule is critical whether you're doing your first FHa loan or 2nd because most people that we encounter cannot take two full mortgage payment hits and still qualify to buy (IE they need that rental income offset on the property they're leaving in order to qualify for the new property).

@Matthew Kwan

@Carlos Valencia

[Albert Bui]

Quote from @Jordan Spillers:

Excellent thoughts. Thanks for sharing. So with FHA, I didn't realize you can get more than one! I thought it was a one-and-done deal. In that case, are there any stipulations to convert it to a conventional loan when refinancing? Thanks a ton for your thoughts!

more than one FHA when you've paid off a prior FHA loan is different than having two FHA loans simultaneously or concurrently but I did reply regarding a 2nd concurrent FHA loan as well (you can get 2 FHA loans in both cases just need one of those 4 exceptions).

In some cases you'll encounter 100 mile rule and 2nd FHA exceptions (25% equity on vacated property requires a full appraisal on vacated property to document it + 100 miles ) Just plan according so you dont get caught with your pantelones down.

@Matthew Kwan@Carlos Valencia