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An FHA-Funded Duplex For Your Initial Property Investment

Category: Finance

The most difficult aspect of getting into real estate investing is knowing where you should begin. This can be stressful and overwhelming since it is a big decision to make.

If you don’t have a lot of finances to spare but you want to produce income immediately, buying a duplex using your FHA multifamily financing is ideal. Compared to single-family homes of similar sizes, duplexes are usually cheaper and earn more rental income. Here are other reasons you should invest in a duplex:

1. You can get a duplex by applying for an FHA. It is the only owner-occupied loan available for this type of property. Since March 2015, it allows a low down payment of only 3.5 percent and it doesn’t need a landlord experience to qualify. To help you meet the requirements for a loan, it will also consider the amount of the potential rental income of the other half of the duplex.

2. Once you qualify, you will get two years of landlord experience, which you will need to buy the next property. The FHA will assess your earnings and determine the total amount you can use if you want to buy another duplex.

3. If you do consider moving out after a couple of years, obtain a lease on the half of the duplex and give it to the lender. You can then use 75 percent of the overall rental income to be eligible for the next loan.

By buying a duplex with your FHA loan, you’ll have the opportunity to purchase more homes using the rental income from the other side. After a couple of years living there, you gain the landlord experience and will qualify for the owner-occupied condition. If your earnings reach more than 25 percent of your mortgage after you move out, you will have a better chance of getting the next one.