I just learned about a new way to use the FHA to purchase investments. The most common use of “Kiddie Condo” loans is to help your kids purchase a condo while in college. The thing most people don’t understand about them is they are not just for your kids, the person does not have to be in college, and the property does not have to be a condo. It also does not have to be in a different town as some people believe. The person does have to be a blood relative. I heard of a niece helping her 97-year-old aunt a home. The loan is structured just like any other FHA loan, only 3.5% down and lower rates than on an investment property, but one person will have the credit and income to support the mortgage and the other does not. Both people go on the deed and mortgage. For this reason you need to make sure you can trust the person. It is also required that the co-borrower is going to occupy the property but there is no specific time that they must occupy it.
An example of using this to invest would be to purchase a home for you child in college and then when they graduate using it for a rental. You can obtain a much higher loan to value this way as compared to an investment loan. Even if they just lived in it for a couple of months or a year the occupancy requirement would be met and you could have a great rental with very little down. While your child is there you could even have them rent the other bedrooms to cover the mortgage thereby providing them a place to live with no money out-of-pocket. An even more powerful way to use this program would be to purchase a multi-unit property, duplex, triplex, or quad. Many areas in Jacksonville have these type of properties including Riverside, Avondale, Murray Hill, San Marco, Orange Park, and the beaches. This way not only could they be living rent free but you could also be MAKING money that could help pay tuition. Just make sure that your child is not going to run the place into the ground, lol.
As I said before they do not have to be in college so you could do this for a child who has a job but doesn’t have the income to buy a place on their own. You could also do this for your grandkids, niece, nephew, cousins, or any other relative. It could be a good way to get your kids or whomever into real estate investing. It will also allow them to build good credit. This program certainly isn’t right for every situation but in the right circumstances could be very powerful. It’s one of the few ways to get such a high LTV on an investment property. If you’d like to find out more about it please contact me on my website at DuvalREI.com.