Advice on using an FHA in Dallas for MFH

Advice on using an FHA in Dallas for MFH

Dallas, TX · Member since 2015 · 21 posts · 3 votes

Hi all, over the course of the next 6 months (hopefully much sooner) I am looking to buy a personal SFH and a MFH (preferably 4-plex but will pursue anything where the math makes sense). I am leaning towards buying the MFH first and my tentative plan is below. Seeking any advice you're willing to give and am also looking to confirm that what I am proposing is legal.

1) Use FHA to buy a duplex/4-plex with a vacant unit that would conservatively break even or cash flow positive with the minimum down payment and have the 1 vacant unit that needs work.

-I currently live in an apartment with a great rate. If I use the FHA to buy a MFH, would I need to break my lease and physically live in the currently vacant unit of the MFH? Or do I just need to not be profiting off of the vacant unit, technically speaking? There are a few MFH on the market with a vacant unit needing work, so my thought process would be to continue living in my current apartment while updating the vacant unit and using for storage until I could legally lease the last unit. I don't intend to actually live in the unit
-If this approach was viable, how long until I could legally rent out the vacant unit?

-The other approach would hinge upon finding a good SFH deal first and using a conventional loan. I assume then there is no way to make the FHA loan work after buying a SFH with conventional, correct? Disregard my current lease for this scenario.

Thanks in advance for any guidance.

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  • Real Estate Agent · Dallas, TX · Member since 2016 · 432 posts · 341 votes
    6y

    1. If you don't occupy it - you're welcoming yourself into mortgage fraud. I'm not an attorney and this is not legal advice but I would highly encourage you to learn more about this. The key word you just said "I don't intend to actually live in the unit." 

    The easiest and quickest entry into real estate investing is buying a primary. Whether or not that's a 3.5% FHA 2-4 plex or house hacking a SFH with a 3-5% conventional and rent out the rooms. Both are viable options and can really get your feet wet with being a landlord and be a good start.

  • Dallas, TX · Member since 2015 · 21 posts · 3 votes
    6y

    Thanks Kenneth - I was hoping it was more of a tax thing and simply not generating cash would suffice but now after including the word “intent” to my search per your advice, I see that it is not a good idea.  Glad I asked :).  I guess I wait for my lease to end or try and sublet. Thanks again

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