Can I use a 203K FHA Loan for Multifamily to AirBNB?

Question

So here's my story.

I am a 43 year old systems engineer in Iowa, and am looking to get started with real estate.

In addition, I have a 23 year old son who is willing to move anywhere and help out in whatever way he can.

My thought is this...

Have him take a 203k FHA loan on a 2/3/4 plex unit.

He lives in one unit and we either do a short term rental on the others.

My reason/goal is...

I'd like to begin the BRRRR with a house hack doing short term rentals.  Also, I'd like a place to live for a few months of the year in Florida (selfish reason lol). I have a plan to move in the next 18 months from Iowa to Asheville, NC.  So I'd like to do this somewhere in Florida, maybe Miami, which is within the driving range.  I'd then short term rent my home out in Asheville, NC and in the winter, find myself in one of my units in Florida.

Complicating factor:

My son doesn't have 2 years income to show.

I'm wondering the following:

1. Can I even do short term rental on the other units with an FHA. I've heard conflicting opinions.

2. If I signed as a co-borrower on the FHA loan, would that overcome my sons lack of history, credit score, etc.

3. Could I myself apply for the FHA loan in Florida, and then just turn my house into a rental, and live with my gf, and have my son occupy the unit in Florida?

4. Is there a better method, given that I have equity in my current home.

Thoughts?

Lauren Havens · Answer

@Travis Richardson

There's nothing wrong with leasing each unit to an LLC long term and have the leasing contract to the LLC allow the LLC to do short term rentals under it's lease. Also a good way to keep as much of the rental income as possible classified as passive income rather than active income for tax reasons.

Just thinking out loud here.

Ken Latchers · Answer

FHA Loan Rules for Airbnb PurposesFHA loan rules do not permit rentals of living units in the home purchased with an FHA mortgage if those rentals are for less than 30 days. The Airbnb business model is not acceptable under FHA loan rules, which means that if you purchase with an FHA mortgage, Airbnb operations are a violation of the FHA loan rules.What if the borrower has an FHA mortgage and wants to legally run an Airbnb out of the home? In order to avoid violating the terms of the FHA loan rules, a home owner would need to refinance the mortgage with a non-FHA loan.

Laura Dantel · Answer

My short term rentals will be a minimum of 30 days (month to month). My lender is also allowing me to refi out of the 203k into conventional once the project is 80% complete. So if I chose to do Airbnb, I would not have to worry about FHA rules.

Laura Dantel · Answer

I am using a 203k loan and plan on doing a house hack with short term rental for 2 of the bedrooms in the in-law suite.

From what I have researched, you should be able to cosign for the loan but you cannot apply for the loan yourself because you would have to live there.

John Underwood · Answer

Sounds like your son may need to wait until he has 2 years of w2 income to start this approach.

FHA loan, you can use this for 4 or less size multi family. As long as son is living in one unit, it should be ok.

Check with mortgage company about cosigning.

If you do an FHA loan, they will expect you to be living there.

You could do a conventional investor loan and use the equity in your house for the downpayment.

Timothy Borg · Answer

It is a great idea.  I bought a 4plex with a 203k for my first property.  It has worked out great.  All I know is back then you had to rent it out to people longer than a month.  So generally AirBnB would not work.  You could buy it with a 203k, fix it up, then refi it to a conventional and rent it on AirBnB.

Paul Welden · Answer

FHA loans do allow non occupant co-borrowers. Check with your selected mortgage lender for specifics.

Paul Welden · Answer

@Travis Richardson

I did not say that primary borrower and co borrower need to live in the property. I said “FHA loans do allow non occupant co-borrowers,” which means that the co-borrower can be a non occupying borrower. In other simpler words, the co-borrower does not have to reside in the property. Check wirh your lender for specifics. Even though FHA allows this, Some lenders do not.

Giancarlo Orozco · Answer

@Travis Richardson

Multi units are hard to come across in Miami, you may end up more north Miami before you find one suitable for the 203k loan

David M. · Answer

@Travis Richardson

Definitely co-sign a 203k loan, since you are doing brrrr then refi to std loan, start your rentals.  I know many mortgage brokers will refi you for “free” (not charge you their fees but you’ll have govt recording fees) if you originated the loan from them.  So even your refi(s) will be a minimal cost.

Can I use a 203K FHA Loan for Multifamily to AirBNB?

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