FHA for next home and remaining cash for rental investment

4 Replies

Hello,

What are the pros and cons of the following scenario for purchasing my next primary home using an FHA (10% ish) loan, currently don't own a home, and saving the remaining cash for a rental investment? Thank you everyone!

@Andrey Les

Why not have the best of both worlds and house-hack with an FHA loan?

You only use approximately 3.5-5% down payment. Buy a multi-family. You live there with your

tenant(s) for a year. If you decide that you no longer want to live with your tenants next to you, you have money still left to buy another property that you will make your primary residence.

Once you move out the multifamily, you can now rent out that unit. So now you have 2-3 tenants paying you rent while you are living in your own home.

WIN WIN 

@Andrey Les Welcome to BP!

FHA allows you to put down 3.5%, so that is an advantage. Pro

Con (primary home: you have to pay monthly mortgages [unless you buy a multifamily, as mentioned above]

What are you looking to achieve in the long term? That might be a good question to start with. 

Hope this helps. Goodluck. Thanks! - Ola

@Ola Dantis

Thank you for your feedback. I am looking to see if it would be smart to not tie up all of my available cash in my next purchase (less than 20% down) and save some for investing in real estate? The option of moving into a multifamily has passed us but I still want to get started in investing into multifamily property. 

Originally posted by @Andrey Les :

@Ola Dantis

Thank you for your feedback. I am looking to see if it would be smart to not tie up all of my available cash in my next purchase (less than 20% down) and save some for investing in real estate? The option of moving into a multifamily has passed us but I still want to get started in investing into multifamily property. 

 You mean: "moving into a multifamily" is something you choose not to do, right?

Nonetheless, why put down any higher percentage than you need to? A lot less than 10% is doable. Sure, you'd be paying Mortgage Insurance (about 0.85% extra interest) until you have more than 20% equity in it, but, that's why you look for "20%+ off" bargains in the first place!

Or, have fixer-uppers "passed" you too? Hmmm. If you can't keep emotions out of buying your primary, maybe you'd be better off only buying investment properties with your available cash?

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