New to the forums! -Kaitlyn Beard (Texas/Military)
Hey!
I have followed BiggerPockets for quite some time now but this if my first official forum post that I have typed up! My name is Kaitlyn Beard (I go by Keeks) and am in the Air Force. I am in Texas, stationed at Dyess AFB. At 19 years old I bought my first 5/3 home and started house hacking. In other words, I rented out the rooms and the tenants/roommates covered the mortgage. When I discovered what rental properties were and how it is not rocket science to obtain them, I found the right lender who allowed me to get another loan. Keep in mind that I used 2 0% down VA loans for these homes. The second one I am in I also house hack so my mortgages are both paid for. I am now wanting to get another property but do not necessarily have enough cash yet to put down 20% on an investment home (conventional). As of now, I think these are my options. What do you guys think???
Option 1:
I get an FHA loan at 3.5% and find a 2-4 door multifamily and continue house hacking.
Option 2:
This one I did not know I could do until today, unless I can't? It is just what a friend and fellow investor told me their lender said. (I'll be fact checking it with the same lender this week). I was always under the impression that a conventional loan is anywhere from 15-30%. My friend, Ryan, told me I should get a conventional loan at 3-10% down. Yes, I would be paying PMI, but my current house I live in is too big for me and my roommate. I need to run the numbers based off a prospective property I find, but if I got a smaller house I think it would be doable. Don't worry I'll be doing some math!
Option 3 (a little unsure of this one):
HELOC because of the $80k+ in equity I have in my first invested home. Part of me thinks this will disturb my cash flow but I guess not because then I would be able to invest in 2 single family homes with 20% down on each.
What do you guys think?
Hey Keeks, great question. All three options are super viable and it's hard to go wrong. I agree with your friend, Ryan, that doing 3-10% down on a conventional loan is typically more advantageous. People really get tied up in PMI but it's not a huge deal in my experience. As for which option in particular, it depends on your goals. If you want to do multifamily then your option 1 FHA makes lots of sense. If you want to be more like your first house hack with a SFH, then 3-5% down conventional is usually a better choice than FHA. The choice between SFH and MFH depends on your specific goals/preferences as well as your market. I think opening a HELOC on your primary residence is a super smart move. It'll be much more difficult to get a HELOC once you move out so having the access to cash is nice. You mentioned this is for your first house so it may already be a rental in which case it'll be more difficult. The beauty of house hacking is you can use such a low down payment loan to invest in real estate! Sounds like these options allow you to do that!
Glad to have you on the forum, Kaitlyn! You came to the right place for information!
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I am an Investor-Agent, I have had several similar conversations of this topic with my clients and customers.
Everyone has different goals
and investment criteria, so this is not a one size fits all kind of
situation.
Use Niche.com, Greatschools.org and Msc.Fema.gov for additional research.
Goodluck and go make it happen
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Real Estate Agent Texas (#736740)
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@Kaitlyn Beard , first of all, thank you for your service! All three options are available to you and I like conventional loans over FHA as they don't have as much red tape. Also, the PMI will drop off on a conventional loan once you reach more than 20% equity in the property, whereas the FHA loans have it baked in for the life of the loan I believe. It may depend on the quality of multifamily options in your market to determine if they are the best fit. Some areas have nice multifamily while other communities only have old, outdated multifamily in C/D class areas. I love that you are taking action and thinking about the next steps and how to build a portfolio. Keep going!
Quote from @Bradley Dosch:
Hey Keeks, great question. All three options are super viable and it's hard to go wrong. I agree with your friend, Ryan, that doing 3-10% down on a conventional loan is typically more advantageous. People really get tied up in PMI but it's not a huge deal in my experience. As for which option in particular, it depends on your goals. If you want to do multifamily then your option 1 FHA makes lots of sense. If you want to be more like your first house hack with a SFH, then 3-5% down conventional is usually a better choice than FHA. The choice between SFH and MFH depends on your specific goals/preferences as well as your market. I think opening a HELOC on your primary residence is a super smart move. It'll be much more difficult to get a HELOC once you move out so having the access to cash is nice. You mentioned this is for your first house so it may already be a rental in which case it'll be more difficult. The beauty of house hacking is you can use such a low down payment loan to invest in real estate! Sounds like these options allow you to do that!
Yes! Thank you for your input. The first house is no longer my primary residence as it is my first rental. With some time I have decided to save some more and if the market dips I plan on buying a property at 20% down in Little Rock or Jacksonville, AR. One thing I do not want to do is rush myself into an investment when the numbers have a potential to be more promising.
Quote from @Julio Gonzalez:
Glad to have you on the forum, Kaitlyn! You came to the right place for information!
Thank you!!!
Quote from @Wale Lawal:
I am an Investor-Agent, I have had several similar conversations of this topic with my clients and customers.
Everyone has different goals and investment criteria, so this is not a one size fits all kind of situation.
Use Niche.com, Greatschools.org and Msc.Fema.gov for additional research.
Goodluck and go make it happen
Thank you! You are not wrong, I totally understand that this kind of investing is not "one-size fits all," but I the beauty of it is that peoples opinions can lead to some very informative conversations and further research. Also, thank you for the references!
Quote from @Ryan Kelly:
@Kaitlyn Beard , first of all, thank you for your service! All three options are available to you and I like conventional loans over FHA as they don't have as much red tape. Also, the PMI will drop off on a conventional loan once you reach more than 20% equity in the property, whereas the FHA loans have it baked in for the life of the loan I believe. It may depend on the quality of multifamily options in your market to determine if they are the best fit. Some areas have nice multifamily while other communities only have old, outdated multifamily in C/D class areas. I love that you are taking action and thinking about the next steps and how to build a portfolio. Keep going!
Thank you for your support! What would you define as red tape? I did not know the PMI stayed glued to the loan. I'll have to look into that but that is a good point you have. I do have to share that where I live there are not a lot of worthy multifamily homes :( My hope is for there to possibly be newer ones that come up. I was visiting a friend and they started building duplexes in the neighborhood. I want to snag one! One step at a time... once again thank you for your input! :)