How To Buy a Property with Less Than $50K

What if I told you you could buy an income-producing multi-family property with $50,000? Would you believe me?

That $50,000 is all you’d pay out of pocket and the rent you’d collect from the units you don’t occupy would help you qualify for the purchase. Now you certainly think I am lying. Right?

Wrong.

My absolute favorite way to get into the housing market is buying a multi-unit property with just 3.5% down payment. That’s right 3.5%!

Maybe you have heard of the FHA loan before. For those who haven't, the Federal Housing Administration is a government-backed loan, and would allow you to buy 1 Million dollar Duplex for just 50K out of pocket. Pretty amazing, right.

Perhaps, like many, you thought you needed at least 20% down payment? $200,000? Nope. Not as long as you occupy the property, you are good to close with your 3.5% down payment money (plus your standard closing costs).

That is what I love about taking this route into the housing market. It requires so little cash from you and that’s why the FHA Duplex I bought in 2018 is the easiest purchase I ever made.

There are just a couple details I wanted to point out. As I mentioned, you do need to occupy. But if after one year, your plans change and you want to trade up, no problem.

When considering a multi unit, the FHA loan is good on 2 - 4 units but it is easier on the duplexes, as the 3 - 4 units have what is called a sustainability test. This means your monthly costs to own (Principle, Interest, Taxes and Insurance--aka PITI) cannot be greater than 75% gross market value of rents.

Really that’s all there is to it. As with any loan, you need to qualify according to your income. Credit scores only need to be at a respectable level--above 650 approximately. Loan limits for FHA Loans in Los Angeles County range from $822,375 for 1 living-unit homes to $1,581,750 for 4 living-unit.

Last thing I will say, which for me is really the icing on the cake, you may not stay past that first year, and so if you can afford to buy again without selling in the first place (what was an owner occupied property) would then become a full on, passive income producing investment property.

So if you’re not stuck on just the idea of a single family residence, keep the FHA Multi Unit in mind. The rented units help you qualify for a larger loan amount, you need very little down payment money, and loan limits on a 4 plex extend all the way up to 1.5+ Million.

I hope this helps you see homeownership as something more achievable--even in a famously expensive metropolis like Los Angeles.