Investor · Oakland, CA · Member since 2016 · 171 posts · 63 votes
I know i've read a few blog posts out there but has anyone invested in a Multi-Family home with an FHA loan as there first investments? What was your experience like and do you recommend for someone who's a first time investor..? Thanks!
Real Estate Agent · Mechanicsburg, PA · Member since 2014 · 529 posts · 217 votes
9y
@Jason Pabon I started my investing career using a FHA loan on a 3 unit building. As others have mentioned, its a great way to start and I would highly recommend it. FHA only has a 3.5% down payment and you can ask for 6% in closing costs. When I made my purchase, 2 of the 3 units covered the cost of the mortgage including escrow. It was a great way to save more money for the next investment, learn the management side of investing, and use minimal capital.
Similar to @Tyler Turpin experience, my girlfriend at the time was not a huge fan of living with tenants. Even though our property is in a fantastic area, she would have preferred a single family home. If it is relevant to your situation, you should consider your spouses feelings. Overall, my then girlfriend and now fiance saw the benefit of house hacking. It couldn't have been that bad since she said yes!
Investor · Long Beach, CA · Member since 2016 · 45 posts · 19 votes
9y
I bought my first duplex with an FHA loan. It was great. You really need to look at the numbers on the property and plan for both the higher debt service and PMI.
After 1 year I was able to refinance my loan to a 30yr conventional. The market appreciated a large amount and also the value add work that I did increased the value enough to get me to a 20% equity position. All in, I spent just under 25k on down payment and closing costs and 25k on rehabs. Compare that to the 150k that it would have cost if I used a conventional loan and entered with 20% equity.
The downside: you actually need to live on the property. While my duplex was not in a war zone, my wife did not feel safe living there. I moved out after 6 months.
Another downside is when using an FHA loan, they make you get a special inspection. The house has to meet certain "livable" qualities which restricts you to buying somewhat "turn key" properties rather than fixer uppers which would make a refinance much easier.
All said and done, an FHA loan is an awesome way to get started on multi family properties. I am looking to use it again some day.
Philadelphia, PA · Member since 2016 · 86 posts · 21 votes
9y
Great question @Jason Pabon. I am a first time investor as well and many have pointed me in the direction of a FHA loan. On the surface it sounds great, but there's always more to it. I am eager to hear how others have made out when choosing this route.
Investor · Long Beach, CA · Member since 2016 · 45 posts · 19 votes
9y
I believe work experience will depend on your lender. The more you have, the better you look. I had to provide 3 months of pay stubs and bank statements
Investor · Indianapolis In · Member since 2013 · 47 posts · 19 votes
9y
I just closed on my third property with an FHA loan this August. First was Cash, second conventional. Compared to the other two closings the FHA was the most complicated, but a lot of that had to do with my personal situation.
The important aspects to note, higher closing costs (upfront MIP), a one year occupancy restriction, and when you prepare to buy another property income from the property may not be considered depending on the lender.
Investor · Phoenixville, PA · Member since 2015 · 74 posts · 31 votes
9y
I could not recommended this more highly. You have to jump through hoops, but I just bought my second house with an fha loan that is 3 units (refinanced the first as you can only have one fha at a time). I think this is the best way, especially for young people to get a huge jump-start investing and learning about real estate. Feel free to reach out if you have specific questions.
Real Estate Agent · Mechanicsburg, PA · Member since 2014 · 529 posts · 217 votes
9y
@Jason Pabon I started my investing career using a FHA loan on a 3 unit building. As others have mentioned, its a great way to start and I would highly recommend it. FHA only has a 3.5% down payment and you can ask for 6% in closing costs. When I made my purchase, 2 of the 3 units covered the cost of the mortgage including escrow. It was a great way to save more money for the next investment, learn the management side of investing, and use minimal capital.
Similar to @Tyler Turpin experience, my girlfriend at the time was not a huge fan of living with tenants. Even though our property is in a fantastic area, she would have preferred a single family home. If it is relevant to your situation, you should consider your spouses feelings. Overall, my then girlfriend and now fiance saw the benefit of house hacking. It couldn't have been that bad since she said yes!
Yonkers, NY · Member since 2016 · 14 posts · 2 votes
9y
Hey @Jason Pabona and @Fatima Champagne did u ever hear of NACA. it's a loan with 0 down payment, no closing cost, no fees, no required perfect credit, and at a below market Intrest rate. Also no pmi I myself was looking at a fha loan for a 4 family with a house hacking strategy but when I was told about the NACA loan I now want to utilize that loan because of the no money down and no pmi. if I use it to get a 4 family that cash flows I feel it's a win win. then I might still be able to use a fha loan later I'm assuming. They want you to become a member by attending their workshop which i havent had the time to attend because of my over the road driving job. check their website naca.com please let me know you think. Any one else in the BP community with any more knowledge of NACA please let me know thanks
Los Angeles, CA · Member since 2017 · 16 posts · 4 votes
9y
Hey @Tyler Turpin I'm interested in your story regarding moving out midway through the year for the FHA. Did FHA check up and find you not living there or what happened?
Investor · Oakland, CA · Member since 2015 · 63 posts · 55 votes
9y
Hi Jason, I'm also in the Bay Area and I'm just closing my second multi-family FHA deal in a year. Both in North Oakland, a duplex and a fourplex. Don't believe everyone who tries to tell you sellers won't deal with an FHA offer in this hot market. The deals are out there and you can close them. My broker is a total pro, has proven he can close FHA deals and, coincidentally, lives in San Mateo. Connect with @RyanLandis - it'd be worth your time to have a cup of coffee with him. Good luck!
Real Estate Agent · Oakland, CA · Member since 2016 · 123 posts · 77 votes
9y
@Jason Pabon Looks like @Selton Shakes Jr mentioned NACA - if you have ANY questions about qualifying for that program, I've been through the entire process in NorCal and would be happy to talk to you about it. You can buy up to 4 units, and the interest rate always seems to be lower or at least comparable to FHA. To answer some of the questions you mentioned, I'm pretty sure you have to be at a job in your current field for at least one year. They DO require more documents than FHA underwriters, but if you have a great counselor, he/she gets you through it quickly. Another "hurdle" is that you have to be in the property for THREE years, not one (like FHA). If you decide to move (or sell) before your 3-year term, I believe you pay NACA a fee of $25,000? But, as mentioned before, NO MONEY DOWN, no closing costs.
The Oakland office currently has NO counselors, but I was transferred to the Upland office in SoCal and work with a GREAT counselor (Abelardo G.). I received my approval for a 4-plex about one month ago. Anyway, PM if you are interested in hearing about the process.
Rental Property Investor · Napa, CA · Member since 2016 · 68 posts · 57 votes
9y
@Tyler Turpin, I have the same question as @Rob Tossberg. Did anyone check up on your residency or how did you validate that you did or did not live in the property after 6 months? Any sort of fine or spike in payments as penalty for leaving early?
Investor · Long Beach, CA · Member since 2016 · 45 posts · 19 votes
9y
Rob Tossberg Tim McGarvey
Im sorry it took so long, I didn't know you posted to me.
I moved out after 6 months. There are rules that allow you to move if its an unsafe neighborhood. The main reason I moved is because I had written confirmation from my lender that I am allowed to move after 6 months if I am planning on buying again. I think it will depend on the lender.
Saratoga, CA · Member since 2017 · 1 post · 0 votes
9y
@Brent Tarnow Could you recommend any neighborhoods in Oakland that a newbie like myself can focus on that isn't too dangerous and livable? I currently live in South Bay and am looking for multi-families that are more affordable and Oakland/East-Bay seems to be viable options.
Were you able to live rent-free with your previous Oakland properties, cash-flow positively, or just live there at a low cost? It seems like everywhere I've looked the numbers don't ever make sense especially with an FHA loan and PMI but maybe I am coming in with wrong expectations of these bay area properties.
San Francisco Bay Area · Member since 2015 · 196 posts · 181 votes
9y
The way to make the cashflow work with a low down payment is by not having to pay PMI. US Bank has this loan called the American Dream Loan, and it's a loan product that is a part of their "community reinvestment loan budget." I don't know the details of why they do it, but I used it to buy my duplex in Fruitvale in Oakland.
It's a 3% downpayment. There's no PMI. And it allows you to buy a duplex (though not more units). This was great for me, and will allow me to live in this duplex SUPER cheap.
Residential Real Estate Broker · San Mateo, CA · Member since 2013 · 585 posts · 264 votes
9y
@Brent Tarnow thanks! @Jason Pabon it looks like you are in my neck of the woods. I will ping you offline but we should grab coffee and chat about what you are trying to pull off.
Real Estate Agent · Oakland, CA · Member since 2016 · 123 posts · 77 votes
7y
@Hilario Reyes it took almost 8 months at Oakland office. Once I was transferred to Ontario/upland office, it took two weeks :) I would recommend requesting Humberto at the Upland office :)
Thanks Katie. I live in Boston so Humberto is a no-Go. Just had my intake interview today and was scheduled for the next one in 4.5 months from now. May have to reach out to a less busy counselor-office.
Vendor · Ashburn, VA · Member since 2014 · 72 posts · 37 votes
7y
@Hilario Reyes I have met people who have started in DC and moved to the Baltimore office because this office was faster to getting them to step 7. After that they house hunted in the DC market.
Real Estate Agent · Oakland, CA · Member since 2016 · 123 posts · 77 votes
5y
@Keli Smith regarding NACA? The Oakland office ultimately closed, and the quality of the service is super location-dependent. You're in Virginia? I would find a home counseling session (first step by going to their website) to sign up. You then have to wait a week to schedule a time with a counselor. Even though they cover closing costs and down payment (minus $7000 that's on you), you have to have 6 months' reserve of the mortgage payment in your bank account FOR MULTIFAMILY. =) Hopefully listing agents are more amenable to the NACA loan in your area. If your counselor seems slow or like he/she doesn't care, then I would request a switch ASAP.