Approved for 350k

[Jerell Edmonds]

Hello everyone, I have a quick question. I am looking for a (LTR) in my area and then to expand out of state for my next one. I currently have been approved for a loan of $350,000, but it is not enough for a multi-family home in this area. So, I was wondering if it would be best to buy a (SFH) and then rent it out fully after a year. Then, I would use a conventional loan for my next house, hopefully a multi-family. Any advice would be greatly appreciated."

[Kenny Smith]

@Jerell Edmonds

I am sure you are aware, but you'll have to put down 20-25% for an investment loan.  If you're just starting out and open to it, I'd consider house hacking.  You can keep putting as low as 5% down for an owner occupied loan as you build your portfolio..leveraging your money as best as possible.

Best of luck!

[Justin Hammerle]

Hi Jerell - is there a particular area in RI you want to be in?  Although slim there is inventory for multi's in the $350k price range around the Providence area;  nothing glamorous of course but you will have some value add upside.

If you are approved for an FHA, house hacking a multi is likely going to put you on a faster track to scale a rental portfolio than the suggested SFH strategy.

[Sanat Bhandari]

@Jerell Edmonds If you're open to buying a SFH for house hacking, make sure you buy the largest house you can afford (>2,000 sf is ideal). You could live in the basement/half the house and rent out the remainder of the house in such a situation

Another thing to keep in mind that if you're a first time home buyer, you can put 3% down on a SFH via a conventional loan (not FHA). You could potentially make it into a conversion down the line for increased cash flow and get another property after 12 months

Pro Tip: You can only have one FHA loan in your name at a time (with a few exceptions) but 10 conventional loans so you can strategically choose to use your FHA loan for a later date

[Jonathan Taylor]

@Jerell Edmonds I support the conventional house hack route as you can put as little as 5% down an a SFH and move out after a year and convert to a rental.

[Eric Yu]

Quote from @Jerell Edmonds:

Hello everyone, I have a quick question. I am looking for a (LTR) in my area and then to expand out of state for my next one. I currently have been approved for a loan of $350,000, but it is not enough for a multi-family home in this area. So, I was wondering if it would be best to buy a (SFH) and then rent it out fully after a year. Then, I would use a conventional loan for my next house, hopefully a multi-family. Any advice would be greatly appreciated."

SFH house hack is the way to go. People have mentioned low 5% down loans, but there are some credit unions that may have options out there at 0% down. I don't know about Rhode Island specifically, but call around to your local credit unions to check.

[Mekkel Blanchard]

Hi @Jerell Edmonds as everyone has mentioned house hacking is the way to go! Take advantage of the lower down payments as much as you can. As long as you take action acquire the first one and begin to pay down your debt you will begin to build equity and hopefully be able to save more money quicker to purchase the next property. Then down the road you can tap in to your equity with a HELOC/LOC to purchase more property and begin the snowball effect from there!

[Christopher Lynch]

I would look into house hacking a 2-4 unit and using part of the rental income to raise your pre- approval. 

Also, look into the $17,500 RI first time home buyer grant that just came out. This could help. 

If I were you I would try to stick to a 2-4 unit to start. It's very hard to cashflow on a SFH in these market conditions. Unless of course you are looking into a short term rental.