All Forum Posts by: Nnabuenyi Anigbogu

Derek's idea also works. However i would caution you to only use it if you have a GREAT deal that you cannot wait two months to pursue. If you go that route it will definitely cost you in terms of reduced ROI from high points and interest. I use hard money to do flips but i know it costs me a lot more than bank money and account for it in the deal.

From your post i assumed you were looking more at buy and holds (since banks dont typically deal with fix and flips unless its a portfolio loan). If that is the case then be very careful with Hard money or it could bite you. I would say season the money and wait a couple of months.

If you are buying owner occupied properties then a percentage of the DP can be gift funds. If you are buying strictly investment property however, then the best way would be to transfer the money into your account and season it for about 2 months (leave it in the account for 60 days). After that it can be used as if it is your own money. 

@Chad Reidlinger I disagree with that point of view (just my opinion). Yes it requires discipline to pay extra but we are not talking about regular retail buyers (which i would assume would be the majority of the clients you would deal with in the mortgage industry) Successful real estate investors tend to be quite disciplined given how much delayed gratification it takes to makes it (note i said successful which is a small percentage of REI)

For investors looking to get conventional loans (prior to graduating to asset based commercial) the 30 year i believe is better not just for the flexibility in payments but for the effect on DTI. I currently work full time and have two loans to my name. My DTI would be greatly affected by the higher payments of a 15 year and limit my ability to buy another buy and hold with a conventional loan. I personally would rather have two 30 year buy and hold properties over one higher payment 15 year.

There are definitely benefits to the 15 year and if you have the very strong cash position and not worried about DTI concerns then its all good. But the flexibility of the 30 years, stronger cash flow, and ability to get more buy and holds is more important to me at this point.

If that's the case then as long as we stay there for a year and not use the exceptions requirement then there is no issue with potential fraud. 

Haha. Point taken Brian. my mind was getting very curious.

@Brian Gibbons @Bill Gulley

Hence why I asked the question. Thanks for your answers. If needed I can go conventional 25% so I have options. 

However that begs the question if a house hacker buys with FHA knowing that 2-3 years down the line they plan to use it as investment property are they not committing in essence the same fraud you are warning me about?

I ask because I have been recommending that strategy to friends looking to invest and it is also recommend here in BP. I assumed as long as you lived for a year you are good even if you knowingly intend to turn it into investment property in 3 years.

By the way thank you for the replies. It can point out things that i may miss.

@Brian Gibbons

I read through all the FHA literature you posted prior to posting my question. I bought my FHA condo 2 years and spent quite a lot of time reading up on their rules.

If my fiancee buys the unit it will be OO as a place to live. Once my year is up at my current non fha place (2 weeks after wedding) i can move in with her. However at that point we would like to buy a house and move into the suburbs so we would be looking to buy a SFR anytime after the wedding (for a 2 year live in flip). If it ends up that we cant do this I dont mind living there for a year to meet the legal requirement. i would just have to buy the next one as an investment property. My end goal is still going to be to convert all of the units to rentals.

According to this, if taken literally, if my final goal is to turn the building into rental property down the line then FHA wont insure the loan. Does this mean if i want to use it as a rental in 3 years they wont insure it? How would they track that? A lot of house hackers using FHA intend to move out in 1-3 years from their multi unit (as suggested by the BP podcasts). Does this mean they are technically committing fraud?

Just looking at different options

@Steve Vaughan

You are correct in that the low down will eat into the profit. This whole thing is predicated on finding exceptional deals however which can still cash flow even with the low down payment. I have seen a few HUD deals that could potentially work for this but usually OO pick them up before investors can. Also i will have the cash for 25% down but im also working on flips and would like to use the cash for that instead.

If you find a place that offers conventional 5% down for a 3-4 unit non first time buyer please let me know. I searched when i bought mine and could not find that. I will be buying again in 6-8 months and would love to get a 5% non FHA on a 3-4 unit.

Hi All,

I have a plan/strategy that i am considering and i want a quick critique to make sure that none of it is fraud and that it is possible.

My fiancee and i currently own (since may) a four unit building that we owner occupy (under both of our names with conventional loan) and i own an FHA condo that im selling (only in my name and is to close escrow in 2 weeks).

I want my fiancee to purchase an FHA financed 2-4 unit by January of next year and move into it. Since i will still live in the four unit it will be still owner occupied so no breaking of the one year OO rule. We dont mind living apart for a few months (it will be within a 5-10 min drive anyways and i can see her everyday). After we get married in April she can then move back in with me or i with here. Marriage (expanding family) is one of the exceptions i found that allows you to move out of a FHA financed building before one year. Once May hits i would have had one year in my four unit and will buy another FHA or conventional financed building under my name alone.

I dont see an illegalities in doing this since i will still be fulfilling all the OO rules for each mortgage. The only place where we wont have a year of OO would be her FHA building but we will have a legal out due to her getting married.

Please let me know your thoughts