I got a call this week from a gentleman who was turned down for an FHA loan for some units he wanted to buy. He didn’t know why he wasn’t approved, and he was in a panic since he needed full loan approval in 2 weeks so he could close in 4 weeks.

When he told me the income on the property he was buying for $750,000, I explained to him that FHA does not allow the purchase of units that have a negative cash flow. They count 75% of rents which that MUST cover the PITI-MI (principal interest taxes and insurance, and monthly mortgage insurance). He had a good income, but since the building had to be self-sufficient, the lender turned him down.

His realtor referred him to me because I specialize in investment property financing and self-employed borrower financing.

I was able to help him do a conventional loan with 5% down, because of the area the property is in, which made the negative cash flow (on paper) not matter. So yes! He is buying 4 units with a down payment of $37,500 + $10,000 in closing costs. He will collect the May rents before his first payment is due June 1st.

With this deal, he will close on his first investment property and be living there almost for free because of the cash flow he gets from the 3 other units. Another amazing ending for my wonderful clients!