Is Investing in 4 Plex with FHA loan a good idea?

6 Replies

I have been playing around with the numbers and I've found that using an FHA loan (which I am confident I qualify for) I can get a 4 Plex and have a really solid cash flow. This route is very attractive because of the very low down payment. Has anyone had any experience buying a 4 Plex this way? Also I plan to live in one of the units and rent the other three to tenants. Are there any hidden fees I should know about? Can I still get the 30 yr loan term with the 3.5% down payment? What are snags that you guys have ran into? Would you consider this a smart move for my first rental property?

@Joshua Paul the answer to your question is that yes, this is an excellent idea! It is one of the few "cheat codes" in life that allows you to acquire a very attractive asset for very little money down. Make sure while you are underwriting your deal that you are including all of your costs. For FHA loans you will have PMI when you put down less than 25% on a 4 unit. The other issue some of my clients just ran into in Forest Park is something called the "self sufficiency" rule. The rents have to be a certain percentage higher than the total PITI.

I would run this deal by a trusted lender to make sure the deal itself qualifies for FHA. If it does, and the underwriting makes sense, then you should jump on it!

Hello and welcome to this site Joshua!  Please do not make anything I say as a personal conviction.  Getting a special and start off with low down payment is not as good as you think but if the  the location is important as a consideration, the demand for what you buy property and tenant screening, it's in  growth area, is it located within a diverse area, the parking that is available, do you have deep enough pocket if funds are needed, Do nearby amenities exist, is there any nearby retail stores and what are they and does it fit your ideal tenant, and are there any existing tenants.  Does the future look good for that location?

You might ought to be learning how to raise money, form Partnerships,  purchasing apartment complexes, and having positive cash from day 1 could be the best way to go.  You may have heard that having apartment you need to have experience to own them is a myth.  I'm not saying that four-plexes are all bad but are usually feel that their future will be perfect and vacancies are painful, especially unexpected ones.  Most success stories I've heard involves owning many houses and they are all at different addresses.

One of the main reasons is because of the pain you experience with a vacancy. The more units you own, the less painful vacancies will be. I'm not saying you'll ever lose money but beware of it's riskiness and it will probably cost you twice as much as you budget for turnovers. I have been studying very hard for about 5 years, full time, while being bedridden and I have about 30 years of construction management experience as well as having as real estate broker license for about 30 years and a college degree in business that emphasized real estate with honors and being born and raised in Dallas, Texas.

I think all of that background qualifies this 62 year old to be listened to and believed fairly qualified when it comes to real estate and all of what I've said is just a part of my experience qualities.  I could keep going on.  What I'm trying to say is to be very careful owning only 4 units a gentleman that has been buying apartments for about 25 years and owning about 5,000 units and is a multimillionaire has taught me a few things with his many videos on YouTube and being on with Josh and Brandon a couple times and doing many public speeches and predicting he will make about 150 million this year might qualify him as knowing what he's doing.  He is a little pushy on sales but he knows alot.

He says owning single number units is very dangerous and should not be considered because there are many hidden dangers but you need to get started somewhere.  I'm just saying that learning how to raise money and forming Partnerships while you control them might be the way to go.  When you own an apartment complex that has a minimum of 32 units you will be able to hire a property managed by an experienced Property Management Company on a daily basis and free you up to be more productive.  I am sorry that this message was so long but I want you to succeed and I had a bit to say to inform you.

Feel free to ask me about any other particular items that need more attention and you think I might be able to answer.  This is a pretty good place to reach out to me since I am here just about everyday.  In a few more words I want you to be careful, be patient, and take action when you feel ready to go and do what you want to do and never quit.  You might get a few bruises along  the way but stay strong and in control.

Good luck to you!

@John Warren I have been made aware of the PMI fees by a few different people, but no one I have talked to has been able to give any good info on what those numbers look like. Is there a way I can calculate those fees ahead of time? What have you seen from your own experience?

@Joshua Paul just as a ball park figure, you can guesstimate $75 per 100,000 in loan amount. The reason no one can give you a firm amount is because PMI fluctuates according to a bunch of different factors. Only a lender can really give you the number, but as long as you know it is there you should be able to estimate.

This is the cheapest money you will ever get! Take all you can! Owner occupied is the best way to start. You may want to consider conventional at 5% down. There are some programs that allow the PMI to be removed at a future point. The FHA keeps it forever. If you plan to hold this property for along time, then it maybe worth putting up the extra few bucks.