Rental Property Investor · Los Angeles, CA · Member since 2017 · 210 posts · 155 votes
7y
You can get an FHA loan on a property between 1-4 units; owner occupancy is required though. Downpayment can be as low as 3.5% and they will use either the lease agreement rents or 75% of average rents for the vacant units + your income to verify your ability to cover debt repayment. We used FHA to purchase our duplex in South LA. You will need to have some cash reserves to cover a certain number of P&I/tax/insurance/PMI payments (I believe 6 months but double check with a lender). If you do put down less than 20%, you are possibly subject to PMI depending on LTV however you can refinance out of the PMI later on when/if your property appreciates in value enough or your loan balance decreases enough. Hope this helps
Glendora, CA · Member since 2018 · 49 posts · 16 votes
7y
I was recently looking for a multifamily in LA myself. I decided against it only because I kept getting priced out with much higher offers and a ton of properties in Los Angeles have rent control. I was going to do FHA as well. They will do up to 4 units. I believe the max loan out here for FHA is around 700k or so. Or thats what I was told at least. Be careful with that 3.5% down though. When I got pre-approved and was shown numbers on the loan, there was an Up front Mortgage Insurance Premium, which all the FHA loans will have if you are not putting down 20%. So for LA properties, it will probably be at least $5-$15K more. They will roll that into the loan though but with those numbers we just decided to do 5% conventional. After searching for 6 months we have decided to invest out of state. But wishing you more luck than we had.
San Diego, CA · Member since 2017 · 2 posts · 0 votes
7y
Yes, if you are getting an FHA loan, I've also heard that it has to be a single family home.
Here's some info I just found on "FHA-type" multifamily loans, but they all say they require 15% down and it limits you to around $60k per unit, which is not going to get you anything in Southern California. That's only from about 2 minutes of reading though... My mortgage broker works a lot of magic though and he could definitely answer all your questions. His name is Justin Roberts https://www.zillow.com/lender-profile/C2%20Financial%20Corp/
I have a 4-plex in San Diego that I got with a VA loan and I'm currently paying ~$1700/month of the ~$5000 mortgage. I live in the biggest unit (2BR/2bath, 1200sf standalone house) and rent out 3 1BR apartments in the back of the lot. For San Diego, that's much less than I would end up paying for a house without rental units, so it's not a true hack, but I'm still happy with it financially. Good luck finding a hack!
I am not a lender however my lender was very quick to answer my questions regarding FHA. I know for certain it doesn't have to be SFH. I believe you can use FHA on up to a 4-plex. FHA is an owner-occupied loan so you would have to "live-in" the property for just 1 year, however not every investor does that legally (not saying you should or shouldn't). You also have to meet a self-sufficiency test, which are strict regulations regarding what the property looks like and how you will pay for the property if not all units are occupied. Talking to a lender is totally free, and I would ask about their debt-coverage ratio on the self-sufficiency test. On 2 units I believe you don't have to meet a debt-coverage ratio.
If you plan on rehabbing the place and it is run-down you may not even qualify for FHA. You will have to pay mortgage insurance (PMI) until you can get up to 20% equity on the property. It's a great way to get started, but it's not as easy as a conventional loan. I used a program called home-possible and you put 5% down, with a lower PMI than FHA. You can message me if you want my lender's information, I hope this helps.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 210 posts · 155 votes
7y
You can get an FHA loan on a property between 1-4 units; owner occupancy is required though. Downpayment can be as low as 3.5% and they will use either the lease agreement rents or 75% of average rents for the vacant units + your income to verify your ability to cover debt repayment. We used FHA to purchase our duplex in South LA. You will need to have some cash reserves to cover a certain number of P&I/tax/insurance/PMI payments (I believe 6 months but double check with a lender). If you do put down less than 20%, you are possibly subject to PMI depending on LTV however you can refinance out of the PMI later on when/if your property appreciates in value enough or your loan balance decreases enough. Hope this helps
Real Estate Agent · Inglewood, CA · Member since 2015 · 294 posts · 150 votes
7y
Great point @KJ L. @Monica McDowell the self sufficiency test only applies to 3-4 unit properties. FHA County limits for LA exceed 1 million, I have sold quads over 1 mill in LA City. Many lenders have 3-5% conventional loan programs that have lower fees than FHA and if your offer/terms are the same agents prefer conventional over FHA due to their being less restrictions such as the 90 day flip rule etc.