All Forum Posts by: Matthew Porcaro

Hi Ben - welcome!

Do you currently own a property now? Are you in a position where you could do a live-in BRRRR flip? If you do, you can use an FHA loan to find a 2-4 unit property, and live in one unit while the tenants in your other units pay your mortgage and hopefully give you some cash flow. Once you build up enough equity in the house, you can refinance out and continue down the line.

But, it's a great way to get started, since it's a way you can get a rental property for an extremely low down payment of 3.5%

Hi Fellow Matthew - you would ideally need to refinance out of it, but you need to revisit your terms. If you have enough equity in the property, you can do a cash out refi, or refinance first, then take out a HELOC. It really totally depends on your situation, and it's something you need to discuss with your loan officer.

On your next property, you would have to declare it your new primary residence, and as long as your current property isn't an FHA, you ideally only need to put 3% down.

This is how I did my first deal, I bought an extremely distressed duplex with a 203k loan. I put down the least amount possible (3.5%) since my tenant would be paying the mortgage, not me. I rehabbed the property, replacing all the major aspects (electrical, plumbing, roof, etc) and built in a fair amount of equity ($130,000 all in all). Because the flip gave me enough, I was able to refinance out of the 203k within the first year, and now I moved out and rent both units for $2000/mo cash flow.

This is similar to what I did.

What you want to do is buy a distressed/foreclosure property that is 2-4 unit using an FHA/203k loan. Since you're living there, you will be able to put only 3.5% down, which is perfect since you ideally won't be paying the mortgage, your tenants will.

You close on the property, rehab it to get the value up, and once you have 30% of equity into the property, you can refinance out of the FHA loan (getting rid of the monthly mortgage insurance and owner occupancy restrictions), take out a HELOC, RINSE and Repeat with more rental properties.

I strongly every beginner investor should utilize these FHA loans to easily get into their first property. If you have any more questions about this, let me know. I'd be happy to help.

Pat - you can do the same with your live in flip if you use an FHA 203k. Essentially, you're adding a rehab to a distressed property (ideally, a 2-4 unit so you never have to pay the mortgage) and after the rehab, you can refinance out and pull your money back out and use that equity to get yourself into your next BRRRR.

Hi Derek - my first deal was a House Hack that turned into a BRRRR. I did this using a 203k loan on a duplex in Farmingdale, NY (long island, just like you).

If you plan to rent out the property, you want to put the least amount down possible, since someone else is ideally paying your mortgage. An FHA loan lets you put down 3.5%. To get the property for an even lower price, I used the FHA 203k loan, to get a distressed duplex property in farmingdale, which allowed me to not only pay a low down payment, but fix up the property so I was able to refinance out immediately.

If you have any other specific questions on how to do this, let me know. I'm always happy to help. And I did this right in the market you're in...

This is an immediate red flag. Do NOT use a mortgage broker that doesn't have experience with FHA loans. This will make the process a nightmare for you. Trust me. I experienced it first hand.

Save yourself a headache and call around as many as you can, and look for lenders that are WELL VERSED in the loan, and have done it many times before. You'll thank me later. 

HUD homes require a good deal of work, and will usually have some unforeseen issues. That doesn't mean you can't be profitable. My first deal was a fannie mae foreclosure HUD property. Since I bought it with a 203k loan, I was able to wrap all of my rehab costs into the mortgage. I ended up with a home that appraised for much more than my mortgage is ($350,000 mortgage, with a $495,000 appraisal). This means I made instant equity in the deal!

Hi Kristopher - there's a lot to consider when going after an FHA loan. Typically, the requirements are:

• 3% down payment + 1.5% premium for mortgage insurance (this can be rolled into the mortgage)
• owner occupied - which would be fine if you're house hacking
• 580 min credit score
• Steady income for the last 2 years

I used this exact strategy with an FHA 203k loan (rehab loan). I put 3.5% down, then rehabbed a duplex property I bought which was a foreclosure. I lived in it until I was able to refinance out of the FHA loan, and now have a conventional loan on the property, and no longer need to pay a MIP every month.

If you have any specific questions on it on what's holding you back, please let me know. I did this as my first deal and suggest everyone do the same!

Your Realtor doesn't need as much experience with that, you just let them know your criteria of what you're looking for, and the loan officer does the bulk of the work on the FHA side.