Sacramento Real Estate: FHA Financing for Investment Properties? Yessir!
I wrote in an earlier post
, that I had recently picked up a client who had been working with a “part time” Sacramento Real Estate Agent
…during our first phone call, she told me her goal was to purchase a single family residence, in the $230,000-$250,000 range (which would keep her payment around $1500-1600), along the Highway 50 corridor. I like to meet with my clients, in person, so we set up a meeting in my office for the following Friday. As funny as it sounds, that was the day her world changed…
We sat down at 8:30 Friday morning, in my office in Midtown Sacramento, and started hammering out her home buying plan. She was qualified for $425,000 on an FHA loan (though she wanted to remain incredibly within her budget), wanted 3 bedrooms, 2 baths, a proximity near her office at SMUD, and an easy shot to the Motherlode area where she often visited her family. We got halfway through our discussion, when she made the statement, “I would love to find something in this area!”
Now, a typical Sacramento Real Estate Agent would probably have said, “There isn’t anything in this area that would fit your criteria, at that price…”
Well, that may be true for single family residences, but I decided to ask her a question, instead of acting infinitely wise…”Have you thought about an investment property?”
Her response was, “My last agent said I couldn’t buy an investment property with an FHA loan…”
Chalk another one up for the full time Sacramento Real Estate Agent!
I explained to her, that the statement was true if she did not plan to live there, however, if she wanted to occupy one of the units, she could absolutely purchase a multifamily residence using a FHA loan.
Even better, she can use the rents to help her qualify.
Even better than that, I knew of a gorgeous Victorian Triplex, completely renovated, all 3 bedroom/2 bath units, in the heart of Midtown, priced in the low $600,000’s, and averaging $1700 per unit in monthly rent (that’s $5100/mo).
She was in disbelief, and had to call her lender. We made the call together, and he confirmed what I had told her, and that her total payment would be just over $4000/mo. The only issue we could possibly find was that one of the units had to be ready for her to move into. Great news! One of the leases was up at the end of July, and she would be able to occupy that unit. The two other units were on year leases, and would still produce $3400 in monthly rent.
Fast forward to today…my client is in contract on the triplex, in the area she would love to live, with the ammenities she desires, and her monthly payment will be just over $700/month. Oh by the way, her interest rate will be 4.25%, on a 30 Year Fixed FHA Loan, the $275 in monthly mortgage insurance will drop off in 5 years, and if she decides she wants to move out in a few years, she will have a true investment property with incredible cash flow. Also, if she decides to hold the property for the life of the loan, she will be adding a nice chunk to her retirement income.
All this, and she thought she couldn’t buy an investment property with an FHA loan…