Interested in Investing? If so, Try Multi Family Housing Real Estate Investing

Executive Summary –

Real Estate Multi Family Housing Investing; The objective is to find a multi family housing (MFH) unit for sale, nothing to expensive and fixed up. Instead look to find something that needs some work done to it by the mercy of contractors. Reason why a fixer upper is an ideal target for MFH is because you can essentially use/modify the “Buy low Sell High” method, in other words you can buy the property for cheap and fix it up and have an appraiser from the lending company come out and reevaluate the value of the property.

Common Question surrounding MFH:

But most MFH’s cost every bit of $100,000-$300,000 to purchase, what if I don’t have that type of money and I don’t qualify for a mortgage loan due to credit issues or lack of funding for a down payment?

Answers to your question:

If you don’t have the case on hand to afford a six figure property for investing then you don’t have to go take out a mortgage that requires substantially more of a down payment, typically around 10% of the loans value, Example; loan for $150,000 would mean your down payment for that mortgage would and could be $15,000 as that is 10% of the mortgage loan. The more affordable alternative to a mortgage loan is something called the Federal Housing Administration Loan or better known as FHA loan. The FHA loan is in a sense a better alternative to a mortgage loan as it requires a much lower down payment rate. The minimum down payment % for an FHA loan is 3.5% of the loan, the % of the loan only increases if you have terrible credit or no real work history to act as a security for the loan repayment.

Parameters for the FHA loan go as followed:

- 3.5% down payment up front

- 1.75% UPMIP or Upfront Mortgage Insurance Premium which is an upfront expense

- Or .85% MIP paid as a part of the monthly loan payments

- Minimum credit score of 580 pulled from 2 of the 3-credit bureau’s

- Recipient of the FHA loan must have 2 years of consistent work experience.

(FHA loans require that you prove 2 years of consistent employment. You will need to provide at 2 years tax returns, and most lenders want to see your 2 most recent bank statements as well.)

The FHA Loan can be used for all expenses related to purchasing the property and flipping the property. There are ways to use the FHA Loan to your advantage, if you can find a MFH that costs around $75,000 and you acquire a $150,000 loan and you make that 3.5% down payment ($5,250), then you have a difference remaining of $75,000 for what you may ask? To fix the property up. Use the full amount to contract out whatever you need to make that houses value increase, so that when you request the house to be re-appraised the appraiser can see that the value of the house was increased from $75,000 to maybe say $120,000. So the value of the property was increased and you can get a new loan reissued 75% of the houses value which is $90,000.