✅Looking to buy an investment property but getting stuck with how big the down payment requirement is? Say hello to house hacking!
The FHA doesn’t allow anyone to purchase an investment property, but there’s an exception! You can purchase a home as a primary residence (meaning you live in the house) with up to 4 units.
Here’s how it works, you find a house that has 2, 3, or 4 units. Then, you apply for an FHA loan…
You live in one unit and rent out the others!
So, now you have other people paying your mortgage for you. And the best part is that FHA loans are some of the easiest loans to qualify for. Not only that, but your down payment is only 3.5% down minimum.
A lot of people refer to this investing strategy as “house hacking” since you’re creatively finding a way to start investing without requiring all of the money and experience normally required to buy an investment property.
Now, you most likely don’t want to live in the FHA loan forever. So, how do you get out?
The big thing we have to keep in mind is that when you use this strategy, you must follow all occupancy laws. You signed paperwork when you closed on the deal saying that you would live in the home as a primary residence. For most lenders, this means you need to live in the property for about a year.
Specifically for FHA, they want to see you live in the house for a year and have 25% equity in the property before you purchase another home without refinancing the FHA loan into a Conventional investment loan.
You can build 25% equity in your FHA loan by (1) paying down your mortgage and (2) gaining appreciation in your home through the market or improvements.
Using the FHA loan is a great way for many people to get a solid intro into the investing world with minimal risk and effort.
0:00 Housing hacking
0:30 House hacking in the investment world
0:46 What is house hacking?
0:58 The problems with getting an investment property
1:31 Fannie Mae’s down payment requirement chart
2:12 How house hacking works
3:28 Why it’s called house hacking
3:56 What to do when you want another property
4:48 Qualifying for an FHA loan and the minimum down payment
5:31 Banking requirements for multiple unit properties
6:37 Why buy an investment property with an FHA loan?
8:52 How to move out of the FHA loan into another property
9:50 Why refinancing into a conventional in the future might help
11:48 FHA as an option to start investing without the headache
🎧 Listen To The Podcast: https://plinkhq.com/i/1493715474
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