FHA Loan and House Hacking
1 Reply | Seattle, Washington
Bao-Chau Tran
from Mount Vernon, Washington
posted over 3 years ago
Hello,
My name is Bao. I would considered myself a new investor or aspiring to be a real estate investor. I am seriously considering this deal on a 3-plex investment property in downtown Sedro Wolley. It has two long term tenants occupying the upper units and converted garage. It has been legal with the city of Sedro Wolley (I called to confirm) and it status is legal non-conforming (since it was built before the new zoning changes). The main unit (bigger) is currently occupied by the owner, and he may or may not rent back the place (not sure if it is a good idea?).
Anyway, there are two options I am thinking of going to close the deal, one is to do FHA financing, which I have to house hack the main unit. Does anyone know if I could rent the room in the unit I am house hacking? Essentially, I would have a roommate in one of the unit. Otherwise, it wouldn't cash flow positive with just renting out two of the units. I like the FHA route because I wouldn't have to put much down payment down, because we don't have that much cash for down payment right now.
My analysis based on 2 unit rented out plus one of the room in the main unit is $530 cash flow and 44.85% ROI based on FHA 3.5 percent down and 5% interest rate. The seller asking price is $140k, but I am going to offer $120k initially. Is this a good investment?
Second option is to go for conventional loan, which I have to put down 30% down payment, which is too much for us. This route would cash flow nearly $1000 per month but more money down payment up front.
What do you guys think? Any suggestions?
Bao
| Total Cash Needed By Borrower: | $14,200.00 |
| Monthly Income: $1,635.00 | Monthly Expenses: $1,104.31 | Monthly Cashflow: $530.69 | Pro Forma Cap Rate: 7.68% |
| NOI: $13,828.00 | Total Cash Needed: $14,200.00 | Cash on Cash ROI: 44.85% | Purchase Cap Rate: 11.52% |
Ryan Canfield
Real Estate Agent from Chicago, IL
replied over 3 years ago
@Bao-Chau Tran Hi Bao - I think it depends on what your intention for the property is and what your goals are. Are you going to live in it for a few years then move out and turn it into a rental or just to lower your monthly living expenses? I believe you would be able to use an FHA loan - have yourself on the mortgage then rent a room to a roommate, that would further reduce your monthly living expenses. Is your listed $1,635 income fully rented without you living in a unit or with you living in the building?