FHA Investor Loans

FHA Mortgage for Investment Properties!

Today it is very possible to use an FHA mortgage to purchase your first investment property for very little cash down payment allowing you to live rent free while you occupy the home, and to make great cash flows after you move out.  This scenario is low risk because as long as the property is 50% occupied the majority of the debt and expenses are covered and the second unit is largely profit.  The return on investment is can be quite good and there are significant tax deductions that the investor can take advantage of.  Hopefully this information will show you how using an FHA mortgage to purchase a multifamily property is a smart way to buy your first investment property with very little money down.

Use an FHA mortgage to purchase a multifamily property that generates enough income to allow you to live for free while you occupy the property, and healthy cash flow when you eventually move out.

What’s An FHA mortgage And How Does It Work?

The FHA mortgage is a federally insured FHA mortgage that requires the buyer to put down a 3.5% down payment of the purchase price and allows up to a 6% sellers assist.  Without getting overly technical this means the buyer is required to bring 3.5% of the purchase price to the settlement table and can wrap his or her closing costs into the loan.

So for example if you purchase a $250,000 property using an FHA mortgage with a full seller’s assist you would only need $8,750 to purchase the home.  FHA mortgages are readily available for single family homes, duplexes, triplexes and quads but the loan amount limits vary by county and the limits for each state/county are available here: https://www.fhamortgageprograms.com/fha-mortgage-loan-limits/

In Florida the FHA mortgage limits range from about 271,050 and go all the way up to $529,000 which is high enough to allow the buyer the opportunity to afford a multifamily home.

Example Situation On How FHA Mortgage Multifamily Investment

An example of executing this strategy is a duplex that an investor client recently purchased involved largely of students and young professionals.  This investor purchased a duplex that had two identical units that each had two bedrooms, one bath and one parking space.  After looking at comparable rental on local apartments on that street so I knew that a 2-bed apartment with parking rented for $1100 per month plus utilities.

The investor paid $250,000, which included a seller’s assist that covered all of his closing costs and his monthly payment for principal; interest and PMI came to about $1,250 a month.   All in, his monthly total with taxes and insurance came to approximately $1,550 a month.  The investor was able to rent the first floor apartment for $1,100 a month plus utilities and then occupied the top floor apartment with a roommate who pays $550 a month plus utilities.

So the investor is currently getting $1,650/month plus utilities in rent and spends only $1,550 per month for principal, interest, taxes and insurance.  The additional $100/month surplus goes into a reserve account to cover repairs or future capital improvements and the investor currently has no monthly housing expense!

When this investor inevitably moves out, he will generate $2,300/month plus utilities and will still have the same $1,550 per month payment for principal, interest, PMI, taxes and insurance. His monthly surplus will be $750 per month which will easily cover his operating expenses and still allow for a healthy cash flow.

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