Seeking General and FHA advice for Young Adult

[Madison Sloan]

Hello everyone,

My name is Madison, I am 18 and will be graduating college in 2024. I am very interested in cash flowing long term rentals, and multifamily homes. After college, my plan is to move back home. I have a wonderful relationship with my parents and they will let me stay for little to nothing. Due to this, I am hoping to invest those living costs, and additional income that I am saving. For now, I am trying to learn and soak up as much information and advice as I can get. Here are a few questions...

1. An FHA loan seems like a wonderful way to get into REI with very little money down, but my understanding is the loan is contingent on owner occupancy. Would you recommend I house hack a property right out of college to begin investing instead of moving back in with my parents, or stay at home and save as much as I can for a bigger down payment?

2. Where do you get an FHA loan? I am guessing traditional banks don't offer them alongside 20% down mortgages. What are the requirements to be approved for an FHA loan, and what steps can I be taking now to position myself so I will have the best chance of being approved in a year or two?

3. I prefer to work for myself, so my primary income source is a small business that I own, and to supplement that I have a W2 job part time. Do I have to have a traditional or full time job to qualify for a loan, and what real estate loan options are there for small business owners? Would a part time W2 job satisfy the job requirement for a loan? 

4. What are the differences between a duplex, triplex, and quadplexes that would make me want one over another? Perhaps a quad is the most work, but I would also guess it reaps the best cashflow, so why bother with a 2 or 3 unit property? 

5. What do you wish you could tell your 18 year old self regarding REI?

That is probably enough questions for now, that you very much for any and all advice you have for me! 

[Austen Mueller]

Sounds like your setting yourself up nicely. 

1. An FHA loan seems like a wonderful way to get into REI with very little money down, but my understanding is the loan is contingent on owner occupancy. Would you recommend I house hack a property right out of college to begin investing instead of moving back in with my parents, or stay at home and save as much as I can for a bigger down payment?

ANSWER: You will need to be an owner ocupany. I highley recommend HouseHacking for new and espessially young investors. Get pre approved first. If you have enough saved up to start. Why not? 

2. Where do you get an FHA loan? I am guessing traditional banks don't offer them alongside 20% down mortgages. What are the requirements to be approved for an FHA loan, and what steps can I be taking now to position myself so I will have the best chance of being approved in a year or two?

ANSWER: This is a very common goverment backed loan. Speak to an agent. They will get you in touch with their mortgage company. FOr the love of god stay away from the rocket mortgages of the world. Using the agents mortgage company is very important to make sure there is a smooth closing. Most first time buyer/investors use a mortgage company they find on the internet or their bank, and really have no idea who they are working with or what questions to ask. Many deals go south this way. 

3. I prefer to work for myself, so my primary income source is a small business that I own, and to supplement that I have a W2 job part time. Do I have to have a traditional or full time job to qualify for a loan, and what real estate loan options are there for small business owners? Would a part time W2 job satisfy the job requirement for a loan?

ANSWER: It all depends. If your killing it at your small business and have money in the bank it shouldnt be a problem. I would just speask with a mortgage lender, They will be the only onbes who can look at your credit and debt to income and give you a "real" answer 

4. What are the differences between a duplex, triplex, and quadplexes that would make me want one over another? Perhaps a quad is the most work, but I would also guess it reaps the best cashflow, so why bother with a 2 or 3 unit property?

ANSWER: You would bother with the 2 and 3 units because it comes down to what you can afford. You may not be able to afford a 4unit in your market but you can afford a 2unit. Or supply is limited and there is a great oppurtunity as a 3unit and doesnt make sense to wait around in the market for an unknown amount of time until a better 4unit deal maybe comes along. 

5. What do you wish you could tell your 18 year old self regarding REI?

ANSWER:  Make strong relationships with people, and provide value where you can.