Can I do the low down payment thing again now the occupancy year is up?

Question

Occupancy year is nearly up on the duplex I live in and the plan was always to move out, rent my side, and do it again on a bigger building in the next metro over. Two snags. My lender says FHA generally wants you to have only one FHA loan at a time and the exceptions are narrow, and the second one is that to use the rent from my departing unit as income there's an equity threshold I'd have to document. So I either sit on a loan I can't reuse or I bring real money to the next deal. Anyone worked through the sequencing on this?

luis_carrera · Answer

The exception I've read about most is the relocation one, where you move outside reasonable commuting distance of the first house for work, and people quote a hundred mile figure that as far as I can tell isn't a written rule so much as a rough underwriting practice. On the departing residence rent, the equity test is why a lot of people just refinance the first property into conventional after year one and take the FHA loan back off their name. That costs closing costs and a higher rate at today's pricing, which might eat whatever the low down payment on deal two saves you.

nataliehsu · Answer

Something worth working through in your numbers is who runs the duplex once you're in another metro. Self-managing from ninety minutes away works until a tenant calls at 11pm about water, and management on a two-unit building is typically 8 to 10 percent of collected rent plus a leasing fee of half to a full month. Put that in the departing residence math before you decide whether deal two is affordable, because it changes the cash flow the lender is looking at too.

Can I do the low down payment thing again now the occupancy year is up?

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