FHA to House Hack in Greater Boston Area (South Shore)

[Edwin Aguilar]

Hello all, 

My wife and I are looking to invest in our first multifamily home. We're currently in the early stages of the process (i.e. haven't talked to a lender). We both have good credit scores but unfortunately due to our higher education, we also have debt. We've been in stable healthcare positions for >2 years now and are looking to utilize an FHA loan to purchase our first home. As of right now, we've been reading both "First-Time Home Buyers" and "Set For Life" by Scott Trench which has been incredibly helpful - to say the least. We've also been listening to a decent amount of podcasts regarding real estate and have talked to close friends that invest in the Worcester area.

That all being said, (1) my close friends that currently invest have told me that using an FHA loan to purchase a multi-family is unreasonable in this market - how true is this? Is conventional the only way? (2) We want to purchase a home where we'd be able to cover the mortgage costs (approximately $2,000-$2,300) in case we have tenant vacancies for an x amount of time. How realistic is purchasing a home in the South Shore for under $400,000 in this market? We've also considered Framingham, MA, and certain parts of Rhode Island too. Any advice or suggestions are welcomed!

Thank you!

[Luan Oliveira]

Quote from @Edwin Aguilar:

@Andrew Freed Thanks for the response! Regarding the FHA loan that's good to hear. Are some real estate agents just more "equipped" with finding a buyer that will take an FHA loan? Yeah, we've been primarily looking at duplexes and some triplexes. Unfortunately, as of right now Worcester is greater than the commute time that we're looking for. Do you have any knowledge/experience in the Attleboro, Ashland, East Boston, or Malden area?

Malden and Eastie are probably out of the question. Decent three family home in those areas will be bordering a million dollars. If you are looking at attleboro, then I would look a little further into Providence county Rhode Island. Cities like pawtucket, Providence, Lincoln, and even Woonsocket. While there is strong competition, there are still plenty of opportunities left. One thing to note, is that with FHA you can afford to offer more than list as it will only increase your down payment proportionally. So an extra $40,000 on an offer is only an extra $1,200 in terms of down payment.

The key to making an FHA offer work is to be able to work with the seller. I offered on one house that had chipping paint on the garage, but offered to repair the chipping paint out of pocket in case the FHA appraiser wanted it fixed. While that may have scared off a lot of people, it was enough to get my offer accepted. In the end, they did not make any comments regarding the chipping paint. I was also able to get the house at asking price.

Lastly, don't let the low existing rents scare you. Find out what the going market rents are for the area and base your numbers off of those. Be ready to either raise rents, or tell the tenants to leave and place your own tenants. By doing this I was able to take rents from $900 to $1,900, making the house hack work really well. Feel free to reach out if you have any more specific questions.