Planning my first 2 investments, House hacking, BRRRR, finnance?

Planning my first 2 investments, House hacking, BRRRR, finnance?

Member since 2022 · 15 posts · 4 votes

I am working my way to take the jump into my first investment. I am very determined, but spending some time to craft a plan to help ensure a hopefully smooth ride into this new frontier. 

I am moving out of my apartment and back in with my parents and transferring to be an remote employee so I can save faster and 100% of my income. Then the plan is to do an FHA loan and house hack a triplex. By the following year I should be able to save 30,000-40,000$. and I'll be ready to get my second property. Though here is where I have some options. Should I...

1) Continue to house hack the new properties and just scale up once a year that way, or are there limitations to the FHA loans to prevent this?

2) Or should I do a BRRRR, on a rundown fourplex? but if i go that route, i was wondering what kind of financing would be preferable in that situation. Could I still get the FHA for a BRRRR and house hack it? I know some conventional lenders may have issues loaning on a place that needs some rehabbing. And also with the BRRRR method, does the rehab budget have to come out of pocket? Also what's the best route for refinancing? Will it be a problem to go through banks who are judging me off my DTI, Credit score, and W2 job? is Hard money preferable?

Thanks for helping out with this as i continue learning, I just figured out the BRRRR method may help me scale double time, but there are many more moving parts that a new investor could mess up, luckily I am a planner to the bitter end, so lets get this going! Thanks guys.

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  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    4y

    @Caleb Scott to answer your questions directly:

    1. There are limitations to FHA loans to do this. You can certainly use 5% down on single family homes and go that route but you will be restricted in using an FHA loan especially in your same geographical area.

    2. I mean, sure! If you can find one, qualify, etc. You won't be using a conventional loan to acquire a property in this scenario though. Well, there's always an exception I guess...but 99% of the time I need a different loan type (usually hard money) to acquire this type of a property and then refinance it after (that's why there's that 3rd 'R' in the BRRRR method). Now, you will RENT the property before REFINANCE (just like the BRRRR says to do) but you can only work with lenders you will count that rental income.  If they don't count that rental income then go to a different lender.  With every property you acquire you should be BETTER with your DTI....at least, if that lender is using the rental income. Make sure that you ask that question in the interview.

    Hope all of that helps in some way.  Thanks!

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