Bought My First Multi-Unit Property - Now How Do I Buy My Next?

Question

Hello BP Family,

After a ton of research on BP, reading the forums, and listening to podcasts - I took the leap and purchased my first rental property in July.  I acquired a 4-plex property in Tacoma, WA using a 3.5% down FHA loan.

I am using the house-hacking and BRRR strategies - currently living in one unit, renting the other three, and repairing/upgrading the property as needed.  Although the beginning has had its challenges, I'm at a place now where things have stabilized a bit.  I'm refocusing on future goals and plan on adding more properties to my portfolio.

And there lies my questions:

What are my options purchasing my second property with my current property in an FHA loan?

How would you approach my situation?

How did you finance your second property?

Thank you in advance everyone.

Brent Coombs · Answer

If its value NOW is sufficiently above what you paid (giving you 20% equity or above), AND you've lived there at least a year, AND after refinancing it into a conventional loan you'll achieve a net positive cash flow with all 4 units rented, AND you have another 3.5% saved for another 4-plex, then, you're ready to fund your next primary and re-apply! (That's the theory, anyway). Kudos...

Adrian Chu · Answer

Congrats. Now is the time to R-E-P-E-A-T.  :)

Brent Coombs · Answer

@Avi Garg, pssst, don't tell anyone, but I'm not living in Cleveland. Anyone else - help Avi?...

Jeff Brower · Answer

started a new thread on the topic so we can get some answers.

@Tyler Ansell

https://www.biggerpockets.com/forums/48/topics/368...

Jeff Brower · Answer

@Tyler Ansell

Thanks tyler but I do not see anywhere in those links that says the occupancy requirement can be dropped after 6 months. I see the second link and hud definition states the 'majority of the calendar year'; but I do not think that is what the meant. I think that statement is more to do with 'primary/principle residence' definition vs duration. To me this means that to use an FHA loan, you must live there for 51% of the TIME (IE 4 days of the week), not 51% of the year requirement and then sell it (or move out) after 6 months. I have never heard anybody say you can move out after 6 months if you are signing that you will occupy the property for a year. To most on BP, that is considered mortgage fraud. I hope some others will chime in on this....

The first link states:

Establishing Occupancy

The FHA requires you to occupy the home within 60 days of signing the loan security instrument, and "bona fide" occupancy must continue for at least one year, according to the FHA. Because you can only live in one home for a majority of the year, the FHA prohibits a borrower from having more than one loan at a time, with certain exceptions. After the initial establishment of owner occupancy, nothing prevents you from moving out of the home and renting it, unless you want another FHA loan.

The second link states:

Principal Residency Requirement

When you take out an FHA loan, it’s based on the understanding that the home will be your primary residence. This means you have to live in the home for the majority of the calendar year. FHA guidelines require you to establish occupancy within 60 days of buying the home. You also have to sign the mortgage note before the property is considered to be owner-occupied. If you’re married, only one of you has to actually occupy the home to qualify.

4155.1 4.B.2.a

Definition:

Principal

Residence

A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.

Jeff Brower · Answer

@Tyler Ansell Can you explain that further? Do you have any links to where this can be referenced?

Tyler Ansell · Answer

@Jeff Brower

The links do seem to state one calendar year, but the actual HUD doc doesn't say anything but majority.

Tyler Ansell · Answer

@Jeff Brower check these articles out...

http://homeguides.sfgate.com/fha-occupancy-guideli...

http://blog.futureadvisor.com/how-to-use-an-fha-lo...

And also from Hud 4155.1 4.B.2.a Definition of a principal residence

Tyler Ansell · Answer

FHA live-in requirement can go away after 6 months btw. Majority of the calendar year after you establish occupancy within 60 days of buying the home.

Avi Garg · Answer

@Brent Coombs Do you know any portfolio (asses based) lender in Cleveland? Please PM me the info

Bought My First Multi-Unit Property - Now How Do I Buy My Next?

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