Virginia Beach, VA · Member since 2018 · 15 posts · 4 votes
Ok, I’m cracking into this REI adventure and my main goal was to start flipping houses. I have a team and I have the knowledge on where to find a deal and how to run the numbers. The only thing that isn’t appealing to me is the percentage of the profit going to Uncle Sam, which I know is inevitable! But after splitting the profits 2 ways and paying the taxes, the numbers don’t look to hot.. I’m currently looking for houses and I plan on utilizing my FTHB for a 3.5% down payment and Staying in the house for the required 7 month so my question is, would it make more since financially to start with rental properties use the BRRRR strategy ? Or should I flip my first house and use the profit as the 20% down payment? Looking for advice for a successful jump start into my real estate empire!
Real Estate Agent · Manassas, VA · Member since 2013 · 118 posts · 63 votes
7y
With the BRRRR strategy you would avoid the tax implication because you would be refinancing out of the loan that you purchased the property with (most likely an FHA 203k or something along those lines, I'm assuming since you mentioned you'll be using your first time home buyer eligiblity) and not selling it. Just know that you will have mortgage insurance which will make your payment significantly higher than if you purchased with a conventional loan or refinanced into a conventional loan. With the FHA 203k loans (and the other similar loan programs they have with which you can finance distressed properties) you don't necessarily have to be a FTHB. You also don't need 20% down to obtain conventional financing either. There are 3% down conventional programs as well. Find a reputable lender that can tell you what they offer in your area!
Virginia Beach, VA · Member since 2018 · 15 posts · 4 votes
7y
@Heather Skowronsky Thank you!! That helps a lot! I’ve been speaking with my lender briefly and she mentioned the 203k Reno loan I would only need 3.5% down and I figured it was because it’s going to be my first property. I have a few coworkers with rental properties now and they both had to put 20% down on their rental investments. Is their any way to get a conventional loan for only 3.5% down? I’m just asking because I want to sculpt a well developed plan on how to reach my goal. If I need 20% down on each house, it’ll take a little while! Thanks again for your response!
Real Estate Agent · Manassas, VA · Member since 2013 · 118 posts · 63 votes
7y
Yes there are conventional loans that are 3% down, your loan officer might have those programs but if not, shop around. If you are living in the property then it is not an investment property, it's a primary residence and you get to take advantage of the lower down payment (3%, 3.5%, etc). If you aren't living in the property then it is considered an investment property and therefore you will need at least 20% down. Good luck!