How to scale with owner occupied loans

Question

Hey Everybody,

I am looking for a lender on a small multifamily home 2-4 units in PA with a FHA or conventional loan. Also I have a few rentals.

NEED HELP/ ADVISE on the best way to buy as many homes over the next 10 years with owner occupied loans that is legal. I would apricate any help or thoughts on how I can do this. How long I have to live in a home, how soon can I buy another home.

Thanks

Patrick Roberts · Answer

With househacks, the general rule of thumb is that you have to live in the property for at least one year as your primary residence. There are some exceptions to this, but none that are likely to work repeatedly because any UW with half a brain is going to see that you have rental properties and just bought a primary within the past year.

Even if you stay in the home for a year, you may have a hard time buying a new primary with some lenders as this is generally being cracked down on right now. For instance, if you own a SFR and are wanting to buy a new SFR a mile away as a new primary without any other justification (bigger, nicer, better quality neighborhood, etc), expect pushback. Additionally, FHA has the 100-mile rule which is meant to deter this exact strategy.

DTI will likely become a roadblock by your 3rd or 4th property, also. DSCRs can help remedy the income part but not downpayment.

Patrick Roberts · Answer

I mean, the day you close on the property is that day that you can move in.

Are you referring to converting a Fannie/Freddie financed property into a rental? If so, then it's at least one year unless an exception applies. Exceptions are things like unexpectedly having to move out of the area for a new job, major illness that requires you to move in with a family member/friend, etc.

Hunter Gibson · Answer

Do you know what the requirements are with Freddie Mac and Fannie Mae that would allow for a quick move-in timeline?

Sasha Mohammed · Answer

To add to what @Patrick Roberts said, Fannie/ Freddie only allow for 10 financed properties. Interpretation of this guideline is subjective, I've seen lenders deny a loan if you OWN 10 (regardless of financing), own 10 FINANCED, and others allow if the financing isn't F/F financing.

I think at some point the switch to investor-specific lending becomes necessary, but it sounds like you have some time before you run into this issue.

In the mean-time, just play by the rules and you should be ok. FHA is probs not the move after your first w/ them, that 100 mile rule is a soul crusher. Conventional should be good, just don't mess w/ the occupancy fraud stuff its not worth it. Move in, cash in your year, on to the next.

Chris Seveney · Answer

Do not do what letisha james is acccused of doing - thats one place to start.

Sebastian Bennett · Answer

Is this "Underwater Hunter" What happened to the morby method you were pursuing where you were willing to buy property for more than it was worth as long as you could buy it using 100% of other peoples money.

Mike Grudzien · Answer

Maybe a DSCR portfolio product?

How to scale with owner occupied loans

Most Popular Reply