Updated over 6 years ago on . Most recent reply
Pros and Cons of using an FHA Loan
I would like to start my REI through house hacking, but don't have the down payment to qualify for a conventional loan, so I'm considering an FHA loan. While a lower down payment requirement would allow me to purchase a property, I come in with less equity, and, I'd be paying PMI. Can anyone offer some perspective on this? Are there any disadvantages other than those I've mentioned, to using an FHA Loan? Thanks!
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@Tyra Benjamin It is all about leverage. This is an absurd example but show s the power of leverage. You have 100k to invest. Buy 1 house for 100k or 20 houses @ 5% down(yes I know that his isn't possible). Properties go up 3%. Your 1 house you made a 3k profit or 3% return on cash. your 20 houses made 60k on 100k investment or 60% return on cash. Yes I know I am ignoring selling cost. This is for illustration purposes. Investors would love to have 5% down or less.