Real Estate Agent · Jasper, AL · Member since 2020 · 17 posts · 0 votes
Currently looking for a multi-family property using a FHA loan. Most of the properties that make sense once I run the numbers are currently fully occupied. Should I just keep looking or what can I do about this? Look when leases are up, then Purchase or?
Usually small multi-family properties will only cash flow when they are fully occupied. if you are looking to cash flow while living there you might need to rent by the room in some of the units. Traditionally what will happen if you are going to owner occupy a multi-family property is once you are under contract the seller will evict one of the units so you can move in to it.
If the tenant is on a month to month contract or no contract, it will be easier. You can always give them a non-renewal notice (15 days in Florida) and they will move out. If the tenant does not, you can file eviction for non-performance.
Pompano Beach, FL · Member since 2017 · 93 posts · 59 votes
5y
Hey Connor, I've done two FHA duplex house hacks. You assume and have to honor whatever lease is in place. FHA will require you to take occupancy within 59 days. So you can do one of two thing if there is a long term lease in place.
Find a property with a lease coming up within a 3-5 months of contract date. The closing process with FHA will buy you 60 days so by the time you close, you will be within the 59 day requirement and able to provide the current tenant a notice of non renewal
Ask the owner to renegotiate the current lease with the tenant. Unlikely as you could walk but you can get creative ie increase purchase price and or deposit to allow the owner to give the current tenant “cash for keys.”
I also would be surprised if you were able to cash flow as a house hack unless there are 3 or more units. What owner occ will do is dramatically lower your cost of living especially if you are currently renting as whatever your difference in monthly note is at least you are applying it to equity build and not rent.
Upgrade the units and increase the rents. That will close the gap on the mortgage payment difference. At this point my first property almost pays for both after a remodel and rent increases.