How To Buy Your First Home & Investment Property Simultaneously

6 Replies

Hey, BP

Hope all is well!

I am fairly new to the RE world & I'm looking to purchase my first Buy & Hold / Investment Property simultaneously while also building my own startup using a similar method for commercial space I would love to run a few additional questions by you when you have the opportunity.

I read your post on how to buy your first investment property & home simultaneously.

According to FHA site: "To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower."

Additionally, "FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be insured will be the only one owned using FHA mortgage insurance."

To further clarify this issue, FHA loan rules also add, "Any person individually or jointly owning a home covered by an FHA- insured mortgage in which ownership is maintained may not purchase another principal residence with FHA insurance, except in certain situations as described in HUD 4155.1 4.B.2.d."

Those types of circumstances should be discussed with an FHA representative and/or your loan officer. Check with FHA if you have circumstances that might be considered eligible for an exception to these FHA loan rules.

It's important to note that borrowers who do not adhere to the FHA occupancy rules could be considered to be acting in "bad faith" on their FHA mortgage loans.

Contact your loan officer or the FHA directly to learn what the consequences of acting in bad faith on an FHA loan may be in your state.

Read more: http://www.fha.com/fha_article?id=371

After doing additional research I came across this strategy: intellibiz.com/doubleescrow.html.

This seems like it could be the most efficient workaround. I could do a master lease with an option to buy at a later time.

My primary concern is the restrictions on obtaining another owner occupied home in another city.

Does this strategy you conceived provide that option?

Additionally, will I be approved for an FHA loan without established credit?

Any insight you could provide would be greatly appreciated.

I'd be obliged if you could walk me through this step by step process.

Please let me know your thoughts.

You're the best.

Talk to you soon!

@Jeremy Cohen

Don't get ahead of yourself in Real Estate.  If it sounds complicated, don't try it until you understand exactly what you are getting into.

I see 2 scenarios here:

1. Buy an owner occupied property that will pay you to own it?  House hack.

2. Start a commercial venture up in a commercial space.

Please correct me if I'm wrong.

Scenario 1:

Good idea. Now keep it that simple. FHA isn't the only way to go, but it is a good one. I would find a 3 or 4 family house in a neighborhood you'd like to live in and buy it.

Make sure it is a good investment AFTER you move out of it.

Nice and simple.

Scenario 2:

Totally separate from buying your personal residence.  I have no clue what you are trying to do, but having a personal residence that pays you money to live in it will help what Scenario 2 ends up being.

Here are some options for buying houses, SFH and 2-4 units:

0% Down:
NACA (https://www.naca.com)
VA Loan (http://benefits.va.gov/HOMELOANS/index.asp) Rural Development Loans (Renovations MAY be included)
(http://www.rurdev.usda.gov/HSF-About_Guaranteed_Loans.html)

3.5% Down
FHA (http://portal.hud.gov/hudportal/HUD/topics/buying_a_home)

3.5% AND Renovations
FHA 203k loan (http://portal.hud.gov/hudportal/HUD/program_offices/housing/sfh/203k)

5% Down - (currently not funding new purchases)
Homepath Owner Occupied (http://www.homepath.com)

Not as cheap, but come with renovation options attached to the loan:
15% Down
Homepath Investment (SFH only)

25% Down
Homepath, and pretty much any bank, Investment (2-4 Unit Buildings)

Auxiliary:

http://203kcontractors.com/ You can have 2 VA loans at a time according to another BP member

Calm your horses... Realistically... You should buy a small multi like a duplex, triplex or 4plex. You'd be buying a home and an investment property all in one. And you can only have an FHA loan, one at a time, and if it's owner occupied.

Thanks for your swift reply, Vincent

So you would recommend a multi for my first buy & hold?

Should you use MLS to discover the best multis or a different lead generation source?

When considering pricing what is the range I should look into?

What advantages would a multi have over a SFH if any?

Since you can only have one FHA loan at a time what option is best because I'm currently in Tampa looking to relocate to Miami.

All the best!

@Jeremy Cohen I would recommend a multi, and a real estate agent can pull listings from the MLS for you, and the price is based on your income but I would say like, $100k-$200k. For a multi, you only have to replace one roof and your vacancy rate will never be zero because there's multiple people living there, vs an SFR where it's either 100% or 0%

Hey, Alex + Vincent Thanks for your swift reply!

I'm an interdisciplinary designer & marketing consultant

I'm fairly new to RE, however, don't think of me as naive.

This post gave me the idea of House Hacking: 

https://www.biggerpockets.com/blogs/2872/blog_post...

I learned how to do a simultaneous close from a brilliant man & mentor for a different purpose.

That specific technique piqued my interest in REI & seemed practical for what I'd like to do & simultaneously allow me to find housing.

I love what I do it's profitable, however, I want to do more.

This is my vision:

I'm initiating a new startup co Seven Times Eight a new platform for co-working & education technology.

After months of strategic planning & close examining we’ve decided to put our initial focus on uniting the best and brightest minds to solve the ongoing problem of education reform.

We plan to launch around Jan '16. Super excited. Would love an opportunity to work with you all one on one.

We are offering an extremely affordable and flexible space for people to host their groups and events in addition to offering educational courses.

Tony Robbins says that

"The path to success is to take massive, determined action."

My main concern was actually being able to buy & hold the property temporarily then sublet it & eventually be able to get another house in another city.

Ideally using a double escrow would be extraordinary for this scenario since I could do a master lease with the option to buy at a later time & date.

If you negotiate a pure “earn-out” or performance-based purchase deal to buy one property(or

assets of a property) after another, and get 6-9 month options before I had to close it,

I can

advertise that property or assets through all kinds of local, regional national or international

advertising media that are on or off-line,

paying only on performance for the advertising -

meaning, you only pay for the ads if they deliver a buyer that closes.

The object here, on any purchase option I do, is to give the seller a pure earn-out and pay

them out of a future sale or earnings.

My goal in selling the property to another buyer is to

get a decent upfront payment if possible,

or a larger variable payment that's 10 to 25% above the

payments I would be making to the seller.

Worst case, your buyer defaults and you either take the property back and resell it – it’s sort of

like a buy-here, pay-here car lot.

Or you give it back to the original owner, who gets to keep all

you've paid him or her so far.

But all you’ll have paid them came from monies other people paid

to you first.

Does that make sense?

Additionally with the links you provided I thought I would ask you if they based the criteria on credit or not as far as being approved.

As long as I have the down payment monies or if I take one of the other options you suggest at 0% down would there be any ordeals?

My goal with subletting office space scenario two is no different from the first scenario aside from it being commercial space. I already have the strategy in place as far as funding is concerned.

Since I'm virtually unknown & this is my first buy & hold I wanted to garner direct experience from members based on their personal experiences.

Thanks again!

You're the best.

Talk to you soon.