My name is Kellyn and I currently live in Huntersville, NC. My husband and I are closing on a new build townhouse in the next few weeks and within the next few months are hoping to househack it by hosting travel nurses (we have checked our HOA bylaws and there is nothing in the document restricting it).
My question lies with how I can purchase a second property sometime over the summer months in the Oshkosh, WI area by potentially partnering with my brother. He is very interested in getting involved in real estate, but he is gone most of the year playing professional basketball in Spain (he's back in WI typically May- August). We have been discussing at length whether it would be better to partner on a property we could flip and he could live in over the summer and then either sell or hold the property and rent it out OR he utilize an FHA loan to purchase a small multi family and house hack it and my husband and I purchase a property on our own. Just wanted to see what types of thoughts the BP community had on our thought processes and any suggestions to move forward.
Thank you so much and happy Friday!
If he's willing to partner with you, I would most likely go that route, depending on the deal. He can get primary interest rates and a lower down payment by living in the house, which would be really beneficial to your ROI. However, he will have to live in it for a year to qualify, so I would rent the other bedrooms while he's gone.
FHA loans and house hacking are honestly one of the best strategies to get into real estate. For a new person I would probably argue it's the best method and most reasonable. You can partner with your brother on a small multifamily househack. He gets the loan, you manage the tenant on the other side, he rehabs the unit he lives in. Then you rinse and repeat on another property after 24ish months. In the meantime during that you and your husband could be purchasing rentals through your means (or private money) and you brother could maybe do repairs on those properties as part of his responsibilities. You could go at this separately but chances are you would be more effective together with different financing options, larger network to go to for private money, etc.
@Katie Phillips thanks so much for your reply! That was definitely what I was thinking when he said he was interested in partnering on a deal I just wasn't sure how him living overseas for 9 months would affect the terms of the FHA loan or if it would matter at all. For example, if we purchased a duplex and rented out one unit to a tenant, we would just have to leave his unit unoccupied for the time he was gone, correct?
@Kellyn Cameron yeah, you should leave his unit empty, but if there are multiple rooms in his unit, you could rent those. The safest bet is to ask the about the terms of the loan when you apply, but if it’s technically his primary residence and you can show he does live there, you should be good.
@Katie Phillips ah! Gotcha, so just leave his specific room empty so that’s still technically his “primary”. I’ll definitely look into that more for our specific area. Thanks so much!
@Kellyn Cameron that’s what I would do! I have heard mortgage fraud is happening more frequently
due to more remote work, so some lenders are sending inspectors to home. Leaving his bedroom open should be fine though!
@Katie Phillips one other question. If both my brother and I have the cash to put up to 20% down, would there be any advantage to use an FHA loan versus a conventional?
@Kellyn Cameron if you’re looking to invest in multiple properties, I would put down as little as possible. You can put down as little as 3% on a first primary residence. However, if you already a homeowner and partnering with your brother, they will probably ask for 5% down. If you qualify, the conventional loans will have better rates than the fha loan. Ask your lender to draw up numbers based on a couple of scenarios. With 3-5% down, you will have to pay pmi but it probably won’t be much, and there are options to pay it upfront so you don’t have to pay monthly. It really depends on your personal goals
@Katie Phillips gotcha! That makes sense. So I will be a homeowner, but my husband is the only one the mortgage for our new build townhouse because his credit score was slightly higher than mine and allowed us to get a better interest rate, so whatever property I partnered with my brother on, that would be my first property as well
@Kellyn Cameron oh ok cool! in that case you might be able to get 3% down, but it kinda depends on the lender. I personally decided to go with 3% to save some cash for later
@Katie Phillips that makes total sense now. Thanks so much for your help!!
@Corina Eufinger thanks so much for your reply Corina! All of your strategies are things that we have talked about and are working through the pros/cons just wanted to see if my thought process was heading in the right direction
@Kellyn Cameron no problem! Feel free to reach out anytime!
@Kellyn Cameron if you are on title to the townhome in NC then that property will count as your "first" property. Title shows ownership, who is listed on the mortgage just shows who's responsible for paying back the loan. There are Conventional programs that allow 3% down without being a first time home buyer but most of the time the rates are just slightly higher than if you were to put 5% down. Reason why is lenders like to see the buyer put a little more skin in the game. You'll just need to look at the numbers for both options. Plus with slightly lower credit scores and the minimum down payment = the MI would be higher than that of FHA. The MI on FHA loans are based off a percentage of the loan amount rather than credit scores and LTV. And if you're looking at a multi-unit property then conventional requires 15% down regardless if you're a first time home buyer or not. Just food for thought. Best of luck!!
@Joe Miano thanks for your reply and reaching out! All of the points your brought up were things I did not know about but am glad you mentioned. Thanks!!