FHA Investment Properties

What is a 2-4 Unit Property?

A property is considered a 2-4 unit structure when several key elements are established. These elements include the property having separate entrances and separate electric meters for each unit. In order for the property to be considered a legal 2-4 unit, that property must also be zoned “multi-family” by the county/state in which the property exists.

FHA as well as Conventional financing can be used to purchase a single unit property as well as properties up to 4 units. The down payment requirements differ however been FHA and Conventional financing when it comes to 2-4 unit homes. For example, FHA remains consistent in that the minimum required down payment is still 3.5% for 2-4 unit homes, however, Conventional financing requires 15% down for 2 unit homes and 25% down for 3-4 unit homes.

Is Rental Property a Good Retirement Investment?

Like any investment, whether it ends up being positive or negative depends upon each individual’s personal goals and capabilities. Buying a rental property can indeed be a very good investment for your retirement, especially if that property produces a positive cash flow each month and is not a financial burden on the owner. If maintaining the property and the net rental income that you receive isn’t enough to cover any mortgage payments owed, then it is critical to decide whether the property will be worth keeping or if selling the property is in your best interest.

Is it Cheaper to Build a Duplex than Two Houses?

There is no way to calculate whether building a duplex versus two separate homes would be more or less expensive. There are a multitude of factors that go into determining the cost of building homes, including the cost of the land, the size of the home, the location of the home, the finishings in the home and so many more things. A duplex, also known as a 2-unit, does allow a buyer to move into one unit and rent the other unit, while being able to use the rental income of the second unit towards their qualifying income, when you are utilizing FHA financing to purchase the home.

What is the 25x Rule?

The 25x rule of thumb for retirement planning of any type is to save 25 times your expected annual retirement expenditures. If you plan to spend $30,000 annually in retirement, you’d need $750,000 in your portfolio.

Buy One Rental Property Per Year

Purchasing one rental property per year, if it is financially feasible, can yield an incredible return on your investment. That being said, real estate investment is never a sure thing, so if you are planning on purchasing multiple investment properties, it is best to speak with a trusted real estate agent AND a financial adviser, to map out your plan versus having no plan at all.

Renting a Duplex Pros and Cons

Buying a duplex, triplex or fourplex can be incredibly lucrative and it can provide a great return on investment once the mortgage is paid in full and you decide to sell it. The key to a successful purchase of a 2-4 unit property is understanding what it takes to be a landlord. Not only are their monthly and annual costs

Can You Sell Half a Duplex?

Most often a duplex (also known as a two-family or two-unit) is a single parcel of real estate and so it cannot be divided into two different entities whereby there are two different owners. The title to the property would create issues as well as how lenders would view any types of potential liens that each owner would try to take out. You can safely assume that unless it is a highly unique scenario, that both parts of a duplex are owned by the same owners.

How Long Do You Have To Live In An Owner Occupied Home?

FHA financing can only be utilized for the purchase of your primary residence. Your primary residence means that this is the place that you will spend the “majority” of your time living. At the closing of your FHA loan, you will sign an Occupancy Affidavit that in short states that you agree to live in the property for a minimum of 12 continuous months. As we all know however, life happens, and so after the 12 month period is over, you can rent out your FHA property without committing any type of mortgage fraud.

Conventional financing also assumes that when you purchase a property as a primary residence that you will be living there for 12 continuous months, however, if you did have to rent the property before then, there are generally no ramifications. That being said, if you tried to purchase another property as your primary residence, within the first 12 months of your previous purchase, most lenders would see this as a red flag and would require a solid explanation as to the circumstances that led to you renting out the first property so soon after settlement.

How Long Do You Have To Live In An FHA Home?

FHA financing can only be utilized for the purchase of your primary residence. Your primary residence means that this is the place that you will spend the “majority” of your time living. At the closing of your FHA loan, you will sign an Occupancy Affidavit that in short states that you agree to live in the property for a minimum of 12 continuous months. As we all know however, life happens, and so after the 12 month period is over, you can rent out your FHA property without committing any type of mortgage fraud.

Can I Live In My Investment Property?

Yes, you can own an investment property and live in it assuming that you meet certain guidelines. For example, if you have own a rental property and purchase a primary residence with FHA financing, FHA expects you to live in your new home for the majority of the time for at least 12 months. If you however purchase an 2, 3 or 4 unit property using FHA financing, you can live in one of the units and classify it as your primary residence while collecting rental income from the other units.

If you don’t own any other properties outside of your investment property, there are no issues with you living in that property however deciding to classify it as a primary residence would give you access to more competitive mortgage rates as well as tax benefits at the end of the year.