FHA 3% down for first "home"...and then onto forever home?

Question

Longtime lurker here.  I love Bigger Pockets for teaching me a lot of things real estate investing related.

We are in a fortunate position to have a sizable down payment for our potential forever home.  However, we also want to start our real estate investing journey.  Curious to hear thoughts (criticism welcome as well) on doing the following:

• Use an FHA loan with 3% down to purchase our first home
• BRRRR the first home
• Then use a conventional loan with 10% down to purchase our second forever home

Assuming my job is stable and we purchase within our means, is there anything preventing this?  Or anything I should be aware of?  I think this would be a great way to get my feet wet with real estate.

Brandon Plombon · Answer

@Paul Lee Yes- Typically it won't be a gut remodel house... maybe new carpet/paint/ect. A well kept/livable but outdated fixtures maybe stuck in the 1970s.

Paul Lee · Answer

@Brandon Plombon that makes sense.  Someone else replied the following "Doing a FHA BRRRR deal is hard because FHA requires the home to in acceptable condition for someone to live in, and BRRRR deals basically demand the home to have a lot of room to create sweat equity, meaning the home is usually distressed in many ways, which often makes the home not qualify for a FHA loan.

So you would need a home that is distressed enough that you can add value to it that makes sense as an investment, but also in good enough condition that you can live in it. I’m sure these exist, but it may take a long time and a lot of effort to find such a deal."

Brandon Plombon · Answer

As a lender - just make sure you have 2 years+ of stable income, make sure DTI is in order, Do you have good/decent credit? I don't see why this wouldn't be an issue as long as you can sustain the payments. I would even recommend 5% conventional if you are able to on the second house. With interest rates this low - save your additional 5% down to put elsewhere for better returns than sunk on equity.