Ways to finance second investment property

[David Kors]

Hello everyone, I'm purchasing a multi-unit property soon using FHA loan where I will be living in one of the unit and renting out the rest. My question is how can I finance my second investment property? Can I refinance the property after 6-12 months and use the equity of the house towards my next down payment?

Thank you!

[John Leavelle]

Howdy @David Kors

Since you are using a FHA loan I assume you are putting only 3.5% as a down payment. That low down payment will cause you problems when you try to do a Cash-out Refinance. You will need to maintain a minimum of 25% equity in the property. 3.5% does not equal 25%.

You also will be required to live in the property for a minimum of one year before you can move out.  While living in the property you will probably not have positive Cash Flow.  Thereby not able to increase you Cash reserves (from that property) for investing in another property.

The House Hack strategy is a decent way to get into Real Estate investing. It's just not conducive for quick scalability. The possible exception to this is if you purchase a distressed property and Rehab it using a FHA 203K loan. You may be able to Force Appreciation enough to make the deal work.

Good luck.