Rental Property Investor · San Antonio, TX · Member since 2021 · 3 posts · 1 vote
Hello all,
I'm looking to invest in a Quadriplex in San Antonio Texas, but before I start my research, I wanted to ask those with more wisdom and knowledge on what the most cost efficient financing is for a first time investor. I definitely want to live in one of the units for at least a year and I don't want to invest in a bad area. My best bet is to find a distressed property in a good area and renovate it. Or is it? If so, would I be able to get a loan in addition to an FHA for renovations? Looking for any tips and suggestions I can find. Thank you!
Real Estate Agent · Seattle, WA · Member since 2019 · 301 posts · 188 votes
5y
Hey Garrett!
That's awesome you're looking to start house hacking. Doing renovations has its pros and cons. It looks sexy for sure and you can create some awesome equity. However, it can also turn into a money pit and you could lose many months of rental income. Depends on your experience and comfort level. Buying a place that needs fixing is def not required for house hacking.
As for financing, FHA will be the way to go for OO multi family. Mainly because you can use a 3.5% down payment instead of 15% for conventional. If you want to wrap in the cost of the renovations into the loan, the FHA 203k loan could be useful. You'll want to find an experienced lender for this as they can be tricky to close. Another option is to open a few 0% interest for the first 12-18 months credit cards to finance the renovations. Slightly riskier depending on your budget but it's much more streamlined and you could earn some awesome points!
House hacking can be incredibly rewarding! I would highly recommend that you read Craig Curelop's book called The House Hacking Strategy. It had so many helpful tips and it basically walks you through the entire process.
As for the renovation side of things: Do you have experience in renovations or are you planning to hire out the work? Just wanted to make sure have a plan in mind that will put you in the best situation for success.
Investor · Reno, NV · Member since 2020 · 7 posts · 2 votes
5y
I would definitely look into the FHA 203(k) loan program if you're thinking of renovating a house hack. It may be difficult to find an experienced lender, but from what I've read, it's entirely worth it.
Rental Property Investor · San Antonio, TX · Member since 2021 · 3 posts · 1 vote
5y
@Paul Stamm
Awesome thank you for the suggestion! I plan on hiring contractors to get repair work done. I’ve built quite a network in my area with some reputable hands.
Rental Property Investor · San Antonio, TX · Member since 2021 · 3 posts · 1 vote
5y
@Cohen Woster
Interesting, will definitely look into it. Do you know if the lending requirements are strict with this type of loan? For example, do they want too see two years of solid consistent income, high credit, etc. Or is it a more relaxed loan process in terms of navigating the requirements?
Interesting, will definitely look into it. Do you know if the lending requirements are strict with this type of loan? For example, do they want too see two years of solid consistent income, high credit, etc. Or is it a more relaxed loan process in terms of navigating the requirements?
The 203K is a standard FHA program that has a construction component. They generally want the same information, 2 year's tax returns and W2's, 1 month of paystubs, 2 months of bank statements and 6 months reserves.
Real Estate Agent · Seattle, WA · Member since 2019 · 301 posts · 188 votes
5y
Hey Garrett!
That's awesome you're looking to start house hacking. Doing renovations has its pros and cons. It looks sexy for sure and you can create some awesome equity. However, it can also turn into a money pit and you could lose many months of rental income. Depends on your experience and comfort level. Buying a place that needs fixing is def not required for house hacking.
As for financing, FHA will be the way to go for OO multi family. Mainly because you can use a 3.5% down payment instead of 15% for conventional. If you want to wrap in the cost of the renovations into the loan, the FHA 203k loan could be useful. You'll want to find an experienced lender for this as they can be tricky to close. Another option is to open a few 0% interest for the first 12-18 months credit cards to finance the renovations. Slightly riskier depending on your budget but it's much more streamlined and you could earn some awesome points!
I'm looking to invest in a Quadriplex in San Antonio Texas, but before I start my research, I wanted to ask those with more wisdom and knowledge on what the most cost efficient financing is for a first time investor. I definitely want to live in one of the units for at least a year and I don't want to invest in a bad area. My best bet is to find a distressed property in a good area and renovate it. Or is it? If so, would I be able to get a loan in addition to an FHA for renovations? Looking for any tips and suggestions I can find. Thank you!
HI Garrett,
Fannie Mae and Freddie Mac are revising their median incomes soon for their programs. How does this help you? The Home possible program from Freddie is one of the programs that was restricted in the past due to income limits but the limits are being revised upwards which will allow more people to utilize freddie's HP to finance a 2-4 unit property with 5% down on conventional.
The advantage of HP is that it has lower monthly MI, its conventional financing so not as restrictive as FHA (which can also work for 2-4 units with 3.5% down payment), HP does not require you to meet the FHA SS rule (required on 3-4 unit FHA financed properties).
I've seen freddie's income limits go up about 10-20% this year for 2021 so that might allow more people who are looking to "house hack," to utilize this program.
HP only allows max 2 financed or owned properties total so its a perfect for someone starting out to house hack. Its not so useful for someone who owns more than 2 properties because that would be beyond the limit.
Hope that helps give some options on FHA, conventional, or VA (if you're veteran its 0% down for up to 4 units).