Turning an FHA Loan into an investment property

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Turning an FHA Loan into an investment property

Justin Wroblewski
Blackwood, NJ · Member since 2018 · 9 posts · 0 votes

I am a 24 year old new investor (also new to BiggerPockets) who is motivated to grow my portfolio. I currently own a duplex in New Jersey as of January 31, 2018, which I purchased with an FHA Loan. I currently have the top unit rented out and I occupy the bottom unit. My short term goal is to move back in with my parents so I can rent out both units. This leads me to my only obstacle; Am I within FHA guidelines if I choose to move out of my bottom unit? If not, what is the best way to legally convert this property in to an investment?

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Melissa Kirchhoff
Ottawa, IL · Member since 2016 · 242 posts · 107 votes
8y

@Justin Wroblewski - I might be incorrect here but I think for FHA it has to be owner occupied for a year, and OO qualifies as so many days out of the year, so if you really wanted to make money off of it, you might be able to do something like vacation rentals and short term, and live there in between bookings until that year runs up.

Also, you might could possibly look into refi in a few months to go conventional (you'll also save yourself the monthly PMI, FHA is kinda high...) assuming that you have enough equity in and/or can qualify for it and that it appraises out. But worth looking into!

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  • Melissa Kirchhoff
    Ottawa, IL · Member since 2016 · 242 posts · 107 votes
    8y

    @Justin Wroblewski - I might be incorrect here but I think for FHA it has to be owner occupied for a year, and OO qualifies as so many days out of the year, so if you really wanted to make money off of it, you might be able to do something like vacation rentals and short term, and live there in between bookings until that year runs up.

    Also, you might could possibly look into refi in a few months to go conventional (you'll also save yourself the monthly PMI, FHA is kinda high...) assuming that you have enough equity in and/or can qualify for it and that it appraises out. But worth looking into!

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    8y

    @Melissa Kirchhoff is correct. FHA just requires a minimum time (if anyone is checking) for you to be in unit as owner occupier. You can always refi to conventional, which you may want to do regardless to remove or lessen PMI. Refi will allow you to use FHA mortgage again assuming you are owner occupying and you have substantial equity in first property. Or refi will allow you to use low money down conventional mortgage which will knock off PMI once you reach 22% equity. FHA PMI sticks around until you refi out of mortgage.

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    8y

    Hi @Justin Wroblewski, the only exception to the one year primary residence occupancy requirement that others brought up is if something came up that you could not have reasonably anticipating, necessitating your move. 

    - Mom living in California just got diagnosed with Stage 4 brain cancer, and you want to be there with her for her final months, will work. 

    - You decided you wanted to increase cashflow because you want to be a real estate investor, will not work.

    - Anything in between, best to check with a lawyer.

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  • Justin Wroblewski
    OP
    Blackwood, NJ · Member since 2018 · 9 posts · 0 votes
    8y
    Thanks everyone, very helpful.
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