FHA Loans for BRRRR strategy

19 Replies

Hi BP 

I recently heard a story about someone buying a 2 family with a 3.5% down FHA. After about 8 months they refinanced. They then took the money they cashed out from the refinance and used it as the 3.5% down with another FHA loan. I thought FHA could only be used for primary residences?

Does anyone what they may have done?

An FHA loan can be used for a 1-4 unit place. They are still considered to be Single Family Residences. It seems like the people in your situation probably were not totally honest with their lenders, which people do at times. I would recommend avoiding doing that.

They must have gotten a really good deal and the market appreciated some so they could refinance at appraised value instead of the cost. And yes, you have to live in the property with an FHA loan. You didn't say whether they stayed or not. Did they move out? If so, they shouldn't have.

@Rich Hupper This is hard to do, but possible, ive done it. Bought a foreclosure with an fha loan and moved in for a year. Finding a foreclosure thats distressed enough in price, but also move-in ready is by far the hardest part. FHA is owner occupied for 1 year. There is no legal way around that.

The only way around the 1 year occupy rule is if there is an extenuating circumstance that is causing you to have you move out early. There are legitimate reasons that this would happen like if you had to move for work. Some people will create "extenuating circumstances" that would make them have to move out early so that it can become a rental. It's shady. 

@Andrew Syrios sorry to be more concise they did not stay. And I do not even believe they are living in the one they recently bought with the FHA loan..

Sounds like some fraud here. Who polices these types of things for FHA what are the ramifications for buying a property with an FHA loan and never living it?

Hi @Rich Hupper ! This is a great question and can be done legally. We purchased our first home, a duplex with a FHA loan and occupied half of the property and rented the other half. My husband’s employer moved us right about at the one year mark of owning it, 163 miles away. FHA guidelines allow one to obtain a second FHA loan if extenuating circumstances move you over 100 miles away from you primary residence (our duplex). The move was out of our control with his same employer. We were able to obtain a second FHA loan for a triplex even after renting for 8 months (no time restrictions from 1st to 2nd FHA). We didn’t break any laws. In IL each side of a transaction has to have an attorney. Hope this helps. It can be done but the easiest way is to move. I suggest reading the actual guidelines which you can find online.
Originally posted by @Rich Hupper :

@Andrew Syrios sorry to be more concise they did not stay. And I do not even believe they are living in the one they recently bought with the FHA loan..

Sounds like some fraud here. Who polices these types of things for FHA what are the ramifications for buying a property with an FHA loan and never living it?

Yeah, that sounds like they're breaking FHA rules. There can be very stiff financial penalties and even jail time for that I believe.

Thanks everyone this was been an informative thread into something i thought I already knew about.

I'm currently living in a home and plan on tearing down and rebuilding. The rebuilding process will take at least 1 year. Thus, I'd like to purchase a MF home via FHA and house hack this for at least 1 year. Does anyone know this is possible?

@Adam Kadane shouldn't be an issue as long as you have the credit and income necessary for a loan. Most FHA loans only require you to occupy them for 1 year as your personal residence. After that you can leave and move into the home you are building.

I am not a lender so I do not know all the ins and outs to FHA but reach out to someone local.

Thanks for the feedback.  I actually contacted a lender who informed me that it's ok to own a primary residence and quality for a second primary as long as I live in the second primary for 12 months.  Very interesting.