Best way to get out of a FHA duplex without 25% equity. Thoughts?

2 Replies

Hey guys,

I'm currently in a situation and I'm not sure what the best "next move" is to continue my investing. About a year ago, I purchased my first duplex with an FHA. I currently live in one side and rent out the other. One side brings me $950/mo and the mortgage is $1,100 so it's been great saving the living expenses.

The FHA saved me a lot of cash on a down payment, so I was able to purchase a single family home shortly after with 20% down. I got this home at $100K and it is currently valued around $125K. My plan is to use the BRRR method, and I'm currently renting this house out with good cash flow. I would love to refinance out of my FHA (duplex) and be able to take out another owner-occupied loan in the near future using the same strategy- move into a multifamily with 3%-5% down and eventually BRRR it. The PROBLEM is that I seemed to have purchased my current duplex right at market value...(yes, I have learned this lesson now looking back).

I've been told that the only way to refinance out of this FHA is to have 25% equity in the duplex. Because I only bought it a year ago and the duplex hasn't really gone up in value, I don't have 25% equity and I probably won't for a while. Has anyone ever been in this situation? I almost feel stuck in this FHA. Would anyone recommend refinancing the single family home in order to help pay equity into the duplex? Should I refi the single-family home in order buy another property below market value, or should I refi the home, instead, to put equity into the duplex and open up another FHA? Any thoughts?

It depends on what you want to do with your loans but this is basically an algebra and math problem, you need 25% equity in your non -owner occupied dwellings so you can refinance, save, or do something else to make that happen. Doing so may hurt your cash flow but if you want to free up your FHA that may be the price you pay.

Why can you keep it? If u move jobs or changes in life situations, you move without any penalty. If one side rents for 950, you would easily cover the mortgage renting both side