What is the best way to acquire 2cd rental property

Question

Hey all, first time poster here but long time lurker. I have recently purchased a 2 unit single family home under the FHA owner occupied program. I am wanted to add more properties down the line and am wondering what are the best options for adding another property and also what option presents the lowest down payment? After 12 months I can do this same program again and move into another property in a similar fashion as this? Just looking for suggestions and a better understanding or real world examples of how similar folks have gone about this.

Thanks in advance

Nathan A. · Answer

Typical is 20% for owner-occupied. You can go lower with private mortgage insurance, though.

As for the loan that includes two lots, I really have no idea.

Richard Lawson · Answer

Thanks for the reply. What is the typical down payment for this type of purchase going the conventional route? I should be able to save up a good amount towards a downpayment over the next 12 months but would like to know all options since I have time to research.

Also my loan includes the tax lot next door to the lot the contains the house and garage. I assume I cannot use this for anything while under same loan as the property, except maybe sell it for a bank agreed amount to reduce debt on the mortgage perhaps?

Joe Villeneuve · Answer

Sell the first

Nathan A. · Answer

In order to refinance the first FHA loan into a conventional loan to unlock another FHA, you would need more equity in the property first. You can either wait a while for the property value to increase naturally, or you can try to force appreciation faster by improving the property (for example if it's a fixer-upper). That would require cash.

But if you had cash, you could just as well use the cash for a conventional sized down payment on the next property and avoid the second FHA loan. So cash or time are your friends here and you need at least one. Do what you can to save more money or bring in more income and that will help things to snowball.

Laura Montoya · Answer

Yes, but from what I understand you can only have 1 FHA at a time and will need to pay off the first, refinance, to do so.