Financing options for Multifamily House Hack | FHA/Fannie Mae/LLC

[Tim Tyrrell]

I'm looking at the FHA and Fannie Mae loans for a quadplex in St. Petersburg. I would qualify for the FHA loan or the Fannie Mae loan as an individual. I have around 20K to put down myself along with another 60K from two independent investors, one family member and one friend, if necessary.

I'm wondering if it's possible to take advantage of the 3.5% FHA loan as an LLC that I create as a partnership with my investors, or if the loan needs to be in my name to qualify for the FHA loan? This would be my first home purchase, and I would move into one of the units after purchasing.

I don't see a reason why the 5% Fannie Mae loan would have issues with our LLC, but please correct me if I'm wrong.

If we can qualify for either loan as an LLC, is there one that you would prefer over the other? I read this post by Andrew Postell, so I'm aware of the basic differences re self sufficient/funding fee/MPI/etc -- but I wonder if there is another lens to view these loans through when there's a team of investors considering them. Appreciate the help and happy hunting!

[Raymond J. Rodrigues]

@Tim Tyrrell, if you are planning on ever transferring title of your property to an LLC in the future, it has to be with a conventional loan. FHA will not allow this. When it comes to buying a 2-4 unit property with 5% down conventional, the guidelines mandate that you have 5% of your own funds being contributed towards the purchase to meet down payment requirement. You are not allowed to receive what would be considered a gift in this case to meet the 5% down payment requirement. Your lender should have made you aware of this. There are ways to meet this down payment requirement on your own, but it does require getting a little bit creative, especially if you have "partners" helping out.

FHA does not have a minimum borrower contribution requirement of your own funds for down payment, but does have what's called the FHA self-sufficiency test, which will most likely not pass for a property in a town like St. Pete. This primarily leaves you only with being able to use a conventional loan. You are not able to close in the name of an LLC, at closing, with an FHA or Conventional loan. Happy to answer any other questions that you may have.

If you are working with a realtor, but would like to work with someone that is more investor focused, reach out to @Josh Green. He has assisted quite a few of my clients with their house hack needs in the areas that you are looking to buy.

Always open to discussing further.