Is it possible to use a FHA and BRRRRR strategy together

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FHA will let you buy another property and rent out the current one you're living in - if - you have to move far enough away that the commute to the job from your current house is too far to be reasonable.

Example: My daughter bought a home in Salinas, CA, near Monterey where she was working, with an FHA owner-occupied mortgage. As I recall, they even let her wrap the closing costs into the mortgage and the down was really low, I want to say 5%. She got a job in Walnut Creek, CA, in the SF Bay Area a couple years later. It was too far to be a reasonable commute from Salinas, so FHA let her keep the home in Salinas and rent it out. FHA also let her refinance the loan on the Salinas house for a better rate just prior to this, as I recall. Then, they let her buy a home in Oakland, CA with another FHA owner-occupied loan.

I'm not sure if there is a requirement on how long you have to live in the home before you can then get a job somewhere else. But, if you use the rehab loan mentioned above, you might need that time anyway. I'm also not sure if it matters what your reason for moving is or what type of job, etc. - in other words, I'm not sure if FHA would allow you to just say your job is rehabbing homes you buy and live in for a year before moving on.

At any rate, there may be a way to make the above work for you.  Best of luck to you.

Updated 8 months ago

I also wanted to mention that not all FHA lenders know all of the FHA rules. I had researched them and knew my daughter could do the above. The first lender she spoke with said she couldn't do it and we had to show him the FHA rule saying she could. So, don't necessarily believe the first lender who says you can't do something. You might want to delve into the rules yourself to be sure.

There are two challenges an FHA buyer will face in Oakland (or any other competitive bay area market). One is that they will be competing against 20% down financing that can close in 21-25 days. All things being even, Sellers prefer a higher down payment and a faster close when given the option.

The second and honestly more important issue is that in this market we transact completely "as-is". Sellers do inspections ahead of going on the market and expect buyers to read and do any further due diligence before writing an offer. Effectively what was disclosed is off the table for negotiation as the condition of the home should be backed into their offer price. Not all FHA loans are created equal and some lenders work magic with them but asking a Seller to clear a section 1 report or fix any other "health and safety" issues is very unlikely as there are just too many buyers willing to take on work after closing as long as it is baked into their price.

There are exceptions to this but I don't see too many of them coming up. This may change as we enter a shifting market though. We shall see. 

@Hans Christopher Struzyna Listen to the most recent podcast with Kevin Paffrath. I am familiar with his youTube channel and already knew his story, but he used an FHA/203k for his first deal and it was rough! Lots of red tape, but people have used it to land that first deal and made it work. It just means tons of extra headaches.

@Alfonso Simmons

Ok so the deal is you have to live in the property for a year or 2 check with the bank before you can rent it also to refinance out you need to have 30% equity in the property but after you refinance I guess you could get another FHA's loan but this would be a very slow strategy. I would suggest buying a 4plex with an fha loan, house hack that improve the property while you live there. If you can cashflow while you live there can't go wrong but be sure you have reserves. No money is a concept not reality when owning rental properties. If you dont have access to money you can lose the property very easily.

BRRRR is typically not an option within FHA. However, there are ways. The best way to go about finding what works for you is to talk with a few different lenders. Work with mortgage companies as well as local banks and find out what they will allow you to do.

Originally posted by @Katherine Earle :

@Hans Christopher Struzyna Listen to the most recent podcast with Kevin Paffrath. I am familiar with his youTube channel and already knew his story, but he used an FHA/203k for his first deal and it was rough! Lots of red tape, but people have used it to land that first deal and made it work. It just means tons of extra headaches.

You totally have to do what you can to get your first deal. There are just some markets where its a seriously tall task even if you are willing to dig in and battle the red tape monster. That said, the market is shifting a bit so this line of financing will become more feasible over the next 18 months in even the most competitive markets. 

 

No doubt! My first house is very likely to be a HUD home that I will live in and use a 203k loan for the rehab if the numbers work out. I'm getting my RE license pretty quick here and like Kevin, will probably have relationships with contractors before pulling the trigger when I decide to finally buy my own property as well. It's about getting in the game and making adjustments along the way. When someone worries too much about the details, that's when I have seen plenty of people freeze through analysis paralysis. I might be a newbie regarding real estate, but I certainly have plenty of experience of pulling the trigger where everyone around me would rather suffer being stuck in a life of poverty with no end in sight. No thanks! Red tape?! Bring it on.......

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