Full disclosure: I’m about to show you two easy ways to make money with money. To keep the lights on at Home Loan Mine, many of the links in this blog post are affiliate links. If you register with the websites, through my links, websites that I’ve vetted this week, I’ll earn a small commission each time. If I’m lucky, I’ll earn enough money for lights AND a medium decaf Americano from the Starbucks across the street from my office.
FHA investment loans are not possible but it is possible to start your career as a real estate investor with an FHA loan.
Here are the two ways to go about doing it (with the second way being the way of the true budding investor):
The first way is buying a 2-4 unit property. Borrowers move into one unit, rent the other(s). It’s that simple: you become a real estate investor as soon as you have units you’re renting. If your goal is not to become a big real estate mogul and if the property is in a location you like and suits your needs, you might just live in it forever.
If your goal is to build yourself a real estate empire, the second way can get you on your way.
This way requires you to buy a 1-4 unit property, move into it or one of the units, live in it for a year, then move out, sell it or rent it (or the owner’s unit).
Is it a greatest way?
No, it’s not. But it beats waiting till you can do it with a conventional loan.
Is it the best way?
Yes, if you do not have the down payment for a conventional loan for an investment property.
FHA Investment Loans – Purchase Requirements
Just keep in mind that 3 and 4-unit buildings have to pass the self-sufficiency test. This means that 75% of the rents on all the units must cover all your housing expenses. That is, principal, interest, mortgage insurance, hazards insurance (and any other kind that’s required), property taxes.
You get to include what the owner’s unit would rent at if it wasn’t the owner’s unit.