My husband and I, both newbie investors, are about to purchase our first SFR and are approved for the max amount of FHA financing allowed in our state (FL $315K). Our plan is to house-hack by renting out 2 of the 3 bedrooms for a year or two in order to cut our monthly expenses while saving up for our next investment property, then move out and keep the original house as a long-term rental.
We are currently in a dilemma because we just found out we had an offer accepted on a house that we really liked, but earlier that same day we found a house that we LOVE and put an offer in on that one too. We haven't heard back yet on the second house and might not for a while since it is a short-sale listing, and we are now scheduled to close on the first house in 27 days. I am wondering if there is any possible way for us to go through with the purchase of the first house which we now have under contract AND somehow also purchase the second one if and when the bank approves our offer. The biggest problem I see is that the second house is one with which we would want to take advantage of the FHA 203K program and I have heard that you can only use the FHA loan for the purchase of your FIRST property, and by the time we finally go under contract on that one, we'll potentially already have purchased our "first home". The house under contract now is technically move-in ready, so we could either use the regular FHA loan or add a little value to it by doing a few cosmetic updates with the streamline 203K, but I am worried about wasting the 203K option on that house instead of waiting to see if we can get the second one that we'd rather have. The housing market in our city is extremely competitive right now....This is the first offer we have managed to get accepted and we somehow beat out 5 other offers so we don't want to back out of our current contract if we can avoid it.
Theoretically, could we choose to close on the first house with a 5% down conventional loan instead of FHA and rent it out from the get-go as an investment property, then still purchase the second house with the FHA 203K loan if we want to live in that one instead? If not, are there any other creative financing options we could look into in order to acquire both properties with 5% or less down on both? We have up to $23,000 available for down payments and closing costs, so as long as we could rent the first one out right away, we could potentially make it work, especially if the bank takes a couple months to respond to our offer on the second house, giving us additional time to save up. However, we're well aware that no traditional lender will be likely to approve us for a second mortgage so soon after acquiring our first one since it would make our debt-to-income ratio go through the roof. Any guidance or suggestions would be greatly appreciated!!
Here are additional details on the properties:
Both houses are 3/2s with 2 car garage and fenced-in yard. Taxes and insurance on both are pretty comparable.
The first house is in a very stable, residential neighborhood in the best school corp in the area and houses seem to be increasing in value there. We will be paying $185000 for it but have an appraisal contingency and it's not expected to appraise for much more than $180,000. If we were to rent the whole thing out the initial cashflow would be somewhere between $100-200 month after expenses and saving for maintenance/CapEx. We haven't had our inspection yet, but it is essentially move-in ready so we will either use regular FHA financing or possibly a streamline 203K for cosmetic updates to the kitchen.
The second house seems to have a lot more future value-adding potential. It's in the same school district as the first house but much closer to campus (we live in a college town) so will be more appealing to renters, large enough to convert from 3 to 4 bedrooms and/or add a 3rd bathroom if we want to do so, and would be easier to list on airbnb if we wanted to rent out one of the rooms that way while we were also house-hacking with 1 or 2 long-term roommates. Since it needs a few more repairs than the first house, we would definitely want to use the 203k loan to update it. We are offering 200K but likely could get it for less with the appraisal contingency and our realtor thinks that once it is fixed up we could get it to appraise for 260K. Initial cashflow if we rented the whole place out would be $150-200/month (plus potential extra income from occasional AirBnB bookings of the bonus room with its own separate entrance).
