Aquiring 1st property via FHA

[Silvestre M.]

Hello all, I've read and also heard on a few podcasts that some investors actually got started in the business by accident. Their primary residence appreciated and they cashed out via refi or by selling and used that capital to get their kick start in REI. Obviously the light bulb went on when they got that first chunk of money and said "hey wait a sec, this happened by accident what if I actually try to make money on a deal next time?" and then their education blossomed from there. Now on the flip side this could've easily turned sour if the market in their area went completely the other way, they possibly would've hated RE and never looked at it as a potential investment choice. My questions are definitely coming from a beginner, if you started today in my shoes (full time job, FHA loan 3.5% down).. what would be your initial calculated step in acquiring your first property with the next step in mind? In other words how best can you set yourself up for success without betting on appreciation? Am I limited to paying retail prices when using an fha loan? Can I market to get a property below market value when taking out a mortgage? Thanks BP!

[Aaron Helmholdt]

I just went through the whole process of buying my first property using an FHA loan. The first criteria you will need to meet is that you find a cash flow positive property (many posts on how to analyse this) . Without cash flow you will be constantly struggling to "grow" your business. I did it by getting a duplex that cash flows. I'm adding value by improving the side I live in and raising rents slowly on the other side. By having a positive cash flow property you can save substantial money to put aside for your next purchase down the road.

You certainly are not limited to retail prices. Your mortgage lender could care less how much of a discount you buy for. The better deal you find the better off you will be. The one thing that does have to happen is that the appraisal must be at least what the purchase price is on an FHA loan.

For me, my next step is to buy another 2-4 unit property in a year or two. Saving my cash flow and possibly even refinancing if value goes up enough will create the funding I need.

I hope this helps and good luck!