FHA multi family refi and appraisal?

Question

Just purchased my first duplex fha house hack - super proud! Post and plans coming soon!

But I had some refinance questions, as I look to value add and drop my Mtg insurance.

How long do I have to wait before refi the FHA loan?

Is the appraised value based on cap rate or property value?

The property is more like a townhouse and it’s a very VERY nice neighborhood. Could it be beneficial to split the deed into two properties to try and get a higher appraised value?

Lastly, with any BRRRR, can I AirBNB the property to show as my rental income or does it actually have to be leased to get a refinance?

Thanks!

Chris Bluem · Answer

@Neil Henderson

Thanks for the input!

I don’t plan on short term renting this one as it’ll be my primary residence but looking to try and get going on getting other units while I have momentum.

Thanks again all for the input! Will post about the house and my strategy once it is fine tuned shortly. Thanks!

Andrew Postell · Answer

@Chris Bluem did your lender not go over these things beforehand?  A lot of these questions should have been addressed BEFORE you purchased this property.  Since this is your primary home I'm guessing you were hoping to do a Fannie/Freddie loan afterwards?  They go off of sales comparison value.  Just like your appraisal did when you purchased it with FHA money.  There is no seasoning to refinancing because FHA loans do not have a prepayment penalty. 3 Questions:

• What did you buy your home for?  
• How much money are you going to put into your home?  
• And what will the value be?

If you can answer those questions that will help us guide you on the next steps.

Whitney Hutten · Answer

@Chris Bluem I'll tackle the income part.  If you did AirBNB, that would be ordinary income and fall on your Schedule C.  You could use it for DTI qualifications most likely.  However, most lenders will want to see a 12-month lease and give you 75% of that income to offset the expenses on a property on a refi (PITI and HOA).  Just a note, you technically can't AirBNB with an FHA loan.

Andrew Postell · Answer

@Chris Bluem what do you mean with "hopeful ARV $700k"?  Do you mean it might be $690k?  As long as it's somewhere close to that you are fine.  Refinancing even with just 85% LTV would be very excellent.  Nobody finds deals like this anymore.

Also, are you asking about a "non-primary residence" on another property?  On this property, you are in a FHA loan, so it's your primary home already.  Just let me know what you meant here and I can guide you on the answer.

Thanks!

Neil Henderson · Answer

A couple of thoughts. I agree with @Andrew Postell, when contemplating a BRRRR it's VERY important to talk to your refi lender about what you plan to do BEFORE you buy the property. Be up front with them about your plans, your source of funding, etc.

Most lenders will not allow you to refinance a rental property that is being used as a short-term rental. They like to see at least a 12-month lease tenant in there. Visio lending is one lender I have heard that might do refi's on short-term rentals. I have not actually used them.

Proceed cautiously on FHA loans and short-term rentals, even with a small multi-family. @Clint Harris has more experience with this so he could probably give you more insight into what's allowed and what's not.

Again, talk to the lender! Even if every person on this forum tells you it's ok, you don't want to get crosswise with them.

Andrew Postell · Answer

@Chris Bluem just like the appraisal you got when you purchased the home, Fannie/Freddie will go off of sales comparable properties.  If your property is a duplex, the duplexes will be used in your appraisal.  If you are planning to rezone your property please check with local zoning restrictions on lot sizes to make sure that splitting your lot is allowable.

When using the BRRRR method MOST loans on the "REFI" step will go off of a 12 months lease.

Chris Bluem · Answer

@Andrew Postell

So I mean if ARV hits 700 then I’ll probably be able to get my total investment back out with the refi.

The problem is, if they look only at MF home I don’t think I’ll hit 700. If the comps are SF then I think I can get there pretty easy. So my question is, does the appraiser look at all homes or just MF? If only MF then I could probably split the deed into two townhomes hopefully.

The other question is not related to this house but to the burr method in general. Part of the brrrr is rent, but I am curious if you could Air BNB and get the same result or do you need lease in place?

Thanks!

Chris Bluem · Answer

@Andrew Postell

Thank you. Would those sales comps be only MF homes or all homes? I’m guessing MF, which is why I’m wondering if splitting the deed to two SFR would increase the comps drastically.

Also, on a non-primary residence, would airbnb revenue work to refinance or do you need lease in place?

For your questions: PP 500, investing 60, hopeful ARV 700. Appraised at 560 as is, and neighborhood supports crazy ARVs that’s why I’m looking to unlock comps by converting to SFR or understand if there is a better way.

Thanks!

FHA multi family refi and appraisal?

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