FHA and VA Fourplex
Want to enter into your first Real Estate investment, and live for free? What about start building your portfolio and having some one else pay your mortgage? Of course you do! If you keep reading, I’m sure you will as long as you posses the right mentality, discipline and drive.
Let’s hop right into it. You’ll need the following things:
· 43% DTI (Debt To Income ratio)
· 3.5% Down Payment FHA / 0% Down VA
· Two Years Tax Returns
· 1-2 Years Steady Work History (less depending on if you just graduated)
· 2-4 Months Reserves (2-4x your mortgage payment)
· ~640 Credit Score
There are exceptions to every rule, and with the right help from a lender, most of these obstacles can be overcome.
Buy and Hold
I am personally a huge fan of buy and hold Real Estate investing, and this is a great way to get your foot in the door with minimal money out of pocket. Why am I a huge fan of the buy and hold method? Passive income. Any truly wealthy person will let you know that the key to being successful is time leverage, and making money without actually having to work. Think about it. Would you rather make $100,000 a year by doing nothing, or $200,000 a year working 80 hours a week? Your first fourplex won’t make you $100,000 a year, but it will get you well on your way. Oh yeah, AND the fact that in a traditional 30-year fixed mortgage you will own the property and have boat loads of equity with minimal money out of pocket. Talk about return on investment!
What Should You Look For?
In short, cash flow. Some one once told me, “Cash flow solves all problems”-and it does! There are a lot of variables that go into your calculations, but in short it should be based upon cash flow. A second close to this is exit strategy. If you buy a property that cash flows but it is in the worst part of town, is it really worth it? If you suddenly decide to move and don’t want to long-distance landlord, how easy will this investment be to unload.
There are many other items like cap rate, debt coverage ratio and so on, but to me those come secondary to above mentioned. If you cash flow well, and you buy a deal in a great part of town, it’s a no-brainer.
As always, there are many more items than this to a real estate investment, but these are the basics of an FHA and VA fourplex to me. Everyone has their own opinion, and there are many strategies to the road of wealth. If you do happen to have any questions, feel free to call, text or e-mail me.
James F. Cash
Real Estate Consultant
Real Estate Brokers of Alaska
Properties of Alaska
To learn more about FHA requirements, go here: http://www.fha.com/fha_loan_requirements
To learn more about VA requirements go here: http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp