FHA loan for 3 and 4-plex in California

5 Replies

 I’m looking at a 3-plex corner building with a full 3 bedroom house and a separate duplex, nice property. It is 800k in Los Angeles,Ca. In this neighborhood, the house will rent for $3000 per month, the other 2 two bedroom duplex rents for $1100 and $1500, below market rate. Th total is $5600.

I was told that with. 3.5% down fha loan for 3-plex, Your mortgage payment has to equal 75% of the rents which would equal $4200. Is that a true fha rule? Would I not qualify for this because rents do not qualify me? My daughter and I will be doing this together. We both have over 700 fico midscores and very good incomes...She would be owner occupied ( she currently owns a conventional condo) and I would be the other non owner occupied owner( I own an fha home). Could all of this work with a 3.5% down? We don’t have the 20-25% down payment. Can someone give me info please?

@Gina Williams from Upland, California

Great question, Gina! My clients also purchase 1-4 units. And a great lender, utilizes either the 2nd or 3rd units as a form of income from the property, this way your purchasing power increases. If, you know what I mean. So, what you stated is certainly feasible.  

If, you need a Mortgage Lender recommendation, please let me know. 

Otherwise, hope this helps. 

-Rudy Vazquez

What would you goal with the property be primarily? Have you run the numbers on it? It looks like you are going to be in a majorly negative cash flow situation with this property. $5600/month would be negative by itself on a $800k property, I assume one of those units won't bring in income if your daugther lives in it, and then with only 3.5% down you guys will be paying PMI on top of the mortgage payment.

I don't know about specific FHA rules or qualifying with them, but I would run the numbers and see exactly what you'd be looking at. I'm not sure it will be pretty....

Thank you,Rudolph Vazquez and Ali Boone. My payment with the PMI would be about $5322. The rents would be $5600. Once the under market rents are increased, the rents would be $6200. I would then have insurance, vacancy rate and cap-X i would put back for. The Owner occupied unit would have to be about 500 more.
this 3-plex would be a buy and hold. Im still wondering about that fha rule I heard. We wont qualify unless the mortgage payment is equal to 75% of the rents. Is that rule true for fha? This is what I heard..

@Gina Williams from Upland, California

I strongly recommend speaking to a Mortgage lender experienced with Multi-Family homes. 

Only because, those numbers are very fluid, they will change, depending on the overall acquisition price. 

Too bad you are in Upland, otherwise, I could refer you to some down here in Los Angeles. 

-Rudy Vazquez