Looking to buy a quadplex with a FHA loan?, need advice

[Alexander Small]

Hello, I have a couple questions and I'm looking for advice. Check below. For market calculations, I'm in the San Antonio area.

About Me:

I'm 19. I'm moving closer to my college in the fall, and I'm looking at apartments right now. The more I look into it, I'd be paying close to $1399 a month for rent for a studio apartment, and never seeing any of that money again. I've been thinking about getting some sort of multifamily house, living in one unit, and renting out the other units to build equity through college using the rent payments to pay down my mortgage, and maybe get some minor cash flow. I'm a software developer, so I make approx. $65,000 a year part-time while I'm in school. I currently do not pay student loans (I start payments in 2026). I have a 680ish credit score.

My Question:

What would you do if you were in my shoes? Would it be possible to get a FHA loan on the quadplex, and use the estimated rental income on the DTI calculations? I have a relative who offered to gift me the down payment amount of a house. I honestly have no idea where to start, but I have to play the cards I have right at a young age to get myself setup well for the future.

Thanks,

Zander

[Jeff Nash]

@Denver McClure and @Harrison Sharp would both be good resources to discuss your situation.  

[Ray Hage]

Quote from @Alexander Small:

Hello, I have a couple questions and I'm looking for advice. Check below. For market calculations, I'm in the San Antonio area.

About Me:

I'm 19. I'm moving closer to my college in the fall, and I'm looking at apartments right now. The more I look into it, I'd be paying close to $1399 a month for rent for a studio apartment, and never seeing any of that money again. I've been thinking about getting some sort of multifamily house, living in one unit, and renting out the other units to build equity through college using the rent payments to pay down my mortgage, and maybe get some minor cash flow. I'm a software developer, so I make approx. $65,000 a year part-time while I'm in school. I currently do not pay student loans (I start payments in 2026). I have a 680ish credit score.

My Question:

What would you do if you were in my shoes? Would it be possible to get a FHA loan on the quadplex, and use the estimated rental income on the DTI calculations? I have a relative who offered to gift me the down payment amount of a house. I honestly have no idea where to start, but I have to play the cards I have right at a young age to get myself setup well for the future.

Thanks,

Zander

Based on all that, you should attempt to get a loan. Do you have a relative w/ a higher credit score that is willing to partner up with you or at least have their name on the loan? With a higher credit score and with longer credit history, you'll get a much better rate on the loan. You will also want to work with an investor-realtor like myself (not a "investor-friendly" realtor) to guide on the specific neighborhoods, type of properties, property tax expectations and will ensure a smooth process. Good luck on getting started! It's great to start this early in life.

[Joel Allen]

@Alexander Small

I'd like to commend you on your big-picture mindset and vision...I wish I would have been thinking the way you are when I was 19 years old.

From a lender perspective, there are a variety of considerations that immediately come to mind based on your situation:

- Your current income may enable you to purchase a single-family home, but the price point on a multi-family here in San Antonio likely will push your DTI above the limits of qualifying. However, if the family member you mentioned is willing to be a non-occupying co-borrower, that could increase your purchasing power.

- FHA does have somewhat flexible guidelines on where gift funds can come from, so there should be no issues with the family member providing those funds as long as it's property documented.

- Based on your income & first-time homebuyer status, you may qualify for a down payment assistance program.  Texas offers these programs through TDHCA, TSAHC, and SETH.

- FHA guidelines require student loans in deferment to be calculated toward your DTI at a rate of 0.5% of the outstanding loan balance each month.

- If you purchase a 3-unit or 4-unit property with an FHA loan, the property will need to pass the FHA Self-Sufficiency Test.

Let me know if you'd like to talk in detail about your situation and help nail down a specific plan.

If you're looking for a great real estate agent here in San Antonio to assist you as well, I'd recommend connecting with @Hamp Lee III

[Dawna Willis]

I was looking to do the same for my daughter to help cut college costs. I found the cheaper route was to find either a condo with 3-4 bedrooms that was set up for share housing (meaning a bathroom to each bedroom, the ability to lock your bedroom door) or to purchase a duplex (2/2) so you end up with each duplex only having to share with one other roommate versus one condo and 3 roommates.  --- So for an example, for our 2 bedroom house the average rent would have been about $750-$850 a month in the class B/C neighborhood closest to the local university.  We advertised to college students who are used to rooming and charged $800 per bedroom plus a portion of utilities- So we collected $1600 a month for a tiny 2 bedroom house as opposed to $800. If it was 4 bedrooms we could have collected $3200. 

[Hamp Lee III]

@Joel Allen - Thanks for the add!

@Alexander Small - You're asking all the right questions and taking action! I'm here locally, and my daughter graduated from UTSA in 2018.

I would love to jump on a call with you to discuss your options and bring your vision into greater focus. Working with Joel will help identify your spending range from the lending side of your purchase. That will give us a great foundation to start.