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Multi-family investments: FHA multi-family investing

Purchasing a multi-family property is usually a major investment.

Sometimes, real estate investors worry about not coming up with enough money to cover a large enough down payment.

That’s because, generally with multi-family properties the down payment has to be considerably more than it does with a single-family home.

There are ways to get around that.

How does 3.5% sound?

An FHA loan could drop that down payment of 20% or more to as little as 3.5%.

This type of loan is insured by the Federal Housing Association, so it usually has a much smaller down payment requirement than a conventional loan does.

Of course, there are certain qualifications you have to meet, such as your

  • Credit score
  • Proof of steady income & employment
  • Debt-to-income ratio

Another big qualification is that you have to live in the multi-family property in order to get the loan.

This works with up to a four-unit property.

You are then able to make rental income off the remaining units in order to help you pay the mortgage. After a year you can move out and rent out that unit, too.

You may also then be able to get another FHA loan for another multi-family property and repeat the process.

Advantages of FHA loans

FHA loans have other advantages in addition to the down payment. They also offer

  • Low fixed interest rates
  • Long loan terms

There are two different types of FHA multi-family loans for rental property investors.


The first type of loan is for construction of new rental or co-op housing. It also works for financing larger rehab costs on an already existing rental property.

There are other requirements, as well, to secure this type of loan.


The other type of FHA multi-family loan for an investment property can only be used to refinance or purchase an existing rental.

These types of loans have become more popular, especially in recent years.

In either case, the property has to contain at least five units. If the rental property is smaller, you’d probably want to go with a traditional FHA loan. In this case, you would now need to live in one of the units as your primary residence.

In order to get an FHA multi-family loan, you do have to go to an approved FHA lender.

Certainly, though, there are several good reasons to choose this type of loan.

Why consider FHA?

  • Low interest rates
  • Lower down payment
  • Longer loan period

In order to get an FHA loan, a home or building does have to pass an inspection. This protects the safety of the buyer and their future tenants. It also helps protect the buyer and the lender from any unexpected expenses.

Another requirement is an FHA multi-family appraisal. In addition, FHA loans require cash reserves.

While FHA multi-family loans aren’t for everyone, they can be beneficial for some looking to finance an investment property.

About the author

I am from Chicago, IL and I have been lending in this area for 20+ years. My team and I strive to give you an enjoyable mortgage experience while providing you the best programs and rates! I am also offering a FREE mortgage analysis to determine if refinancing is right for you.