How to Scale after FHA house hack?

10 Replies

New investor here looking to figure out how to start investing and scale up to 5-10 small multi families in 10 years (ish?)… hoping the BP community can help!

I am in the Worcester, MA area, and looking to invest either in Worcester or the surrounding towns. I have about 20k to invest (about 15k in backup money I would rather not use not including 401k)

Duplex in a decent area in the city will go for around 320k-375k, triple goes for 390k-470k. East towards boston, similar or higher, west will be cheaper. 

obviously anything i buy would be low money down... after speaking to my mortgage lender, there are programs available where i could put down betweer 3-5%. 

So my question is, is there a way for me to scale up semi-quickly after a house hack considering where I stand now? unless I am missing something, buying anything in this range would mean my only way to get to the next deal would be to save for another down payment, and would need to be 20% because I couldn't use a beginner loan again.

Is this right? or is there a different method that i am not considering? 

A couple notes:

Don't want to borrow from a private lender or family or anything like that... since I am just starting out, that's not a responsibility im looking to shoulder

Girlfriend is on board, but doesn't want to house hack in a bad area. This rules out cheaper properties in tougher areas. 

I know its possible to get cheaper properties further south/out of the region, but again since I am just starting, don't think I would want to go this route yet

Lots of questions here so I am only going to tackle a few of them. Talk to your lender about how you can scale up. They will know your credit, the local market and the loan products available.

To meet the owner occupancy rules, the FHA requires that you live in the property as your primary residence for at least 12 months after the loan closes. The Department of Housing and Urban Development has been known to spot check FHA borrowers to make sure that they are observing the occupancy rule.

This means, in theory, you could buy another multi-family property (4 or under units for FHA loans) every year on a new FHA loan as long as you moved into it.

Make sure you spend some time soaking up all of the resources available on this sight. My dad used to say a smart man learns from his mistakes buy a wise man learns from others mistakes. A LOT of folks on this site share what they "learned" the hard way and you can save yourself enourouse time, stress and money by reading, watching and listening to all that you can. 


This is a great plan. As Tom mentions you can buy every 12 months with similar low down payment plans. The difficulty in Worcester is that the best value properties in Worcester are not FHA ready and the sellers dont want to sell to FHA buyers if they can get a 5% down Mass Housing buyer or a 20/25% down buyer. The best way to buy FHA is to go NO INSPECTION or buy OFF MARKET. There are great pockets of worcester that have value and are nice places to live, the key is being able to get to work. There are also some owners who will hold paper on a multi as they want to avoid taxes, this is difficult too, but with the right relationships you can get these opportunities. There is a lot of off market trading in worcester.

@Nik Lavoie

Find a partner!

@Tom Rolph thanks for the response Tom. Completely agree, BP is a great resource and I'm trying to absorb as much as possible before jumping in to REI.

Spoke more extensively with my lender today, FHA is one of my options but he says my best route would be 5% down thru the Home Possible program (

There are some restrictions, some of the nicer areas my max mortgage would be around 2700, but otherwise it seems like a much better option that FHA. Avoids the high MI and big FHA fee

@Brian J Allen thanks for the feedback Brian!

Couple follow up questions... as far as using other low down payment options after 12 months, would I just be reusing the same mortgage programs over and over again? I thought you could only use FHA once?

As far as finding deals before they hit the market, how attractive would a low down payment offer like mine be in that situation? I feel like I’d have to swoop in with a cash offer to keep it off the market. Market is so hot right now, what is keeping people from listing?

FHA 203K loan can include the cost of rehab. added into the loan. Great if you don't have tons of money. There is also another benefit I haven't seen talked about here. The 203k loans have a very strict plan for paying out your contractor. Your contractor gets reimbursed after certain inspections are completed. So they don't fall behind and your contractor can't jack up the price midway claiming "but I'm not making any money." It gives the homeowner the upper hand because final payment simply can't happen until the contractor gets the occupancy permit.

While there are downsides depending on the house, this is what I used for my first multi-family, then refinanced 2 years later.

If you don't have a ton of cash its time to get creative.  

I bought my house with a friend who split the down payment, the construction costs and the work.  We bought a house that hadn't been updated since the 50's and was completely paid for, so the owner had lots of room to negotiate.  I am sure if you knocked on doors in Worcester there are plenty of multi family properties that people have had for years and want to get out of, especially now that the Boston market is through the roof.

@Laryssa Stecyk good catch Laryssa... just checked, the program is being updated in a couple days. Still exists, but the loan amount restriction that currently exists in higher end locations will now also extend to all locations.

Thanks for the heads up!

@Nik Lavoie

You can improve the other units and try to slightly bump rents (or at least being to market rate) while you live in another unit for a year, then refinance the property into a different lender and use fha again low dp, move out and into that building and do the same process again a few times if possible

Eventually you can put yourself in a position to refinance one or more properties and use the equity through cash out refinance to put 20 or 25% down on a larger multifamily deal and do same with the apartments as units turnover

Let me know if you have any q

@Nik Lavoie

You can use the same program every year if you have a viable reason to do so. Perhaps a better house. Perhaps a better commute etc. it has to pass the look test of the bank. As for not listing. There are a lot of landlords who want to sell and not let the tenants know. Tenants do a lot of things to sabotage the few like saying there are mice. Or the toilets never work. They realize rents will go up if the building is sold. Also since things are so hot you might get 50 people walking through the units and it really irks the tenants. Long term owners are often more interested in controlling the close date for tax consequence then in another $5-10k. Also they look to avoid the pain and suffering of a deal not working out. They will work with somebody trust and vett the buyer before considering an offer