The FHA Ladder: How New Investors Can Still Control a One Million Dollar Asset in Exp

[Jonathan Bombaci]

A lot of new investors feel stuck right now. Prices are high, rates are high, and cashflow is tighter than it was a few years ago. I get it. I spend a lot of time with newer investors at our meetups and the patterns are consistent. People underestimate how powerful that first FHA loan really is. 

The FHA Ladder is still my favorite strategy for someone in their 20's or 30' s to get started, especially in expensive markets we service like Boston, Portsmouth, and Portland. You use an FHA loan to buy a 3 or 4 family, you live there for a year, and you treat the property like a value add project. You paint, you clean, you tighten up the units, you turn over one or two apartments if the opportunity presents itself, increase the rents. and you slowly force appreciation.

I have watched a lot of people climb this path. One buyer in Fitchburg bought a 3-family that needed cosmetic work. He lived in the smallest unit and spent his weekends painting the other two. He refinanced after twelve months, pulled out enough cash to buy his next place in Worcester, and kept going. Another client in Lowell took on a 3 unit where two tenants were month to month. She raised rents carefully, made small upgrades, and increased the total property income by almost 20% in the first year (Covid helped). The refinance gave her a down payment for her second househack with 5% down. 

The math is what makes the FHA Ladder powerful. You can buy a 4 unit, then 3 unit, then 2 family, then all 1 year apart all with 5% or less down. The combination of low down payment, owner occupant terms, and the ability to use rental income toward your qualification creates a window that most people only get once.

We help around 100 people each year buy their first investment property, so I see the same thing happen over and over. The people who commit to the FHA Ladder build equity faster, learn how to manage tenants, and set themselves up to either househack again or buy a traditional multifamily with stronger footing. It is not always easy. You deal with older buildings, heavier tenant profiles, and lots of learning curves. But it works, and it works in markets where most people assume they are priced out.

If you are young, willing to live in your investment, and not afraid of putting in some sweat equity, the FHA Ladder can be the jumpstart that changes everything. I have seen it work too many times to ignore.