I wanted to reach out to the local Sacramento community and see if I can get some advice on my current situation. A quick run down:
I'm 28 years old and recently married. My wife and I have owned a SFH in the Natomas area since 2016 but have supplemented the mortgage payment by renting out the spare bedrooms. However, we no longer want to rent out individual rooms and wish to sell our home. My goal is to purchase a multifamily in the Sacramento area while I finish college. I wish to stay in this area due to the BAH rate (money I get from the VA to pay for housing) the San Francisco colleges enable me to have, and the cheaper cost of housing in Sacramento.
The problem I am running into is multifamily homes are either incredibly expensive or in really bad areas. My initial plan was to use the VA loan but they require the home to be in a move-in condition. This makes a lot of properties in my price range ineligible or they fall into areas that my wife and I would simply not like to live. We do not have enough cash to put 20% on a loan either.
Can I use the FHA 203(k) if I have already purchased a home (I have used the VA loan)? If I cannot find a suitable place to move to should I just keep my current home or should I find a cheaper location to rent (2000 vs 1300). I have not contacted a real estate agent yet but plan to in the near future. This would be a buy and hold property for myself which I would eventually transition to become my first full rental property.
Let me know what you think. Thanks.
@Shea Bartolino yes you can use the fha 203 k loan or regular fha loan since you do not have a fha loan in your name now .i have been originating loans and real estate investor for a long time so if you have questions just send me a email.
IF your current residence is NOT in your name the yes you can use the FHA or FHA203K Loan. If you have a thought of acquiring more properties within a 100 mile radius you need to go FHA or FHA203K ;loan first.
I used my VA Loan first with the thought of using an FHA203K in a couple of years but got a rude awakening when I was told that if I already own a home within 100 miles, then i can't get an FHA loan.
As for multifamily....it's a matter what YOU are comfortable with. I know what you are going through regarding wanting a small multifamily,...but only being able to find one in "the hood". This is what I'm doing.....and it's NOT for everyone.
I bought a duplex in "the hood" in Oakland...Not every part of Oakland is bad, but my zip code is "The Worst". I found a duplex on a "block" that is actually a pretty cool block. ....I put a renter in the other side of the duplex.....one that I personally screened....she covers most of the mortgage payment.
I bought in August of 2016 and within the next year or so there should be enough equity in the duplex where I can refi out of it....and buy another place and still not have to pay PMI because I will be able to use the VA Loan again.
Now, if you are wondering how can I get a tenant that would want to live in The Hood and be, not a good tenant but a GREAT tenant?....It's simple. She is on Section 8. Tenants that have a Section 8 tenant are actually LESS likely to give you problems, be demanding or mess up your property....why? Because they know if they do.....you can report them to the Section 8 office and they risk losing their voucher. They lose their voucher and a lot are basically homeless. Yes I was able to screen so that the tenant does not smoke (not even weed, has no evictions, no felonies, and no pets.) I had DOZENS that met the criteria that were begging to rent from me.
Another thing you could be facing....may be income. I will be the first to say I certainly was. My gross income made it such that I only qualified for a certain amount of a VA Loan and I know the FHA has somewhat similar guidelines.....so what can you do? Again....this isn't for everyone....but what I did was started investing out of state. In particular, Cleveland. I simply did it for cash flow and to boost my income. I own 5 units in Cleveland now...and everything is 3% rule....in "C" areas. 75% of that gross income now counts as my income for the purposes of getting a loan.
Shea, what that will do for you and your wife is to allow you to qualify for a "bigger loan" with the fha and the VA.
Good luck man....and Thank You for your service.
Thank you so much for your reply. This was spot on what I was looking for. I was browsing through "realtor.com" and saw some homes in terrible need of fixing up that were on the market for 800k. These homes were being advertised as "investment" properties. I'm just trying to find that middle ground. I do not need an amazing area but I am also not trying to be the nicest home in the worst neighborhood either. I'll definitely expand my market with your advice. Thank you so much! Also, if you're using a VA loan then I can assume you're a veteran yourself so thank you for your service.
I'm an agent in the Sacramento area who deals with a lot of multifamily... are you looking at a duplex? Or a fourplex?
Generally speaking, with a fourplex and a duplex being the same price, the duplex is either going to be in much better shape or a much better area. With a fourplex you are essentially buying twice the property (# of units) for the same price, so something has to give in terms of quality.
But this seems to be more a lender-based question than a "How do I find the right property?" type of question, so I'm going to tag someone who can answer and is also a veteran so he'll know your loan options really well: @Chris Mason
Just as an FYI, there are conventional loan now that go down to 3% down. And with a conventional loan the property doesn't have to be in the best shape like VA or regular FHA.
Another option would be a hard money lender. Depending on what you want to do with the property, how long you are looking to hold onto it etc. But that may be another means in which you can limit the down payment and find what you may be looking for if the numbers add up.
You can actually use a VA Construction/rehab loan. I would guess that this route will be your best option. It was hard for me to find local lenders that participate in Fannie May Homestyle renovation loan. Look into that if the VA construction loan or the 203k doesn’t work out. The Fannie May will also have less PMI than the 203k since you don’t have 20% to put down.
Hope this helps.
Good luck! We’re trying to determine if Sacramento is the right market for us as well.