Hello. Welcome to Todd Miller TV. There’s a strategy to be able to buy a place and live in it for free and actually make money by living in a place and a lot of people don’t do it. I’m not really sure why. It’s a very interesting strategy. It’s totally doable for most people. If you have a decent credit score, you can do this. It works every time and this is how it works.
There’s a loan program out there called FHA. It’s one of the largest ones. It’s government-insured and it allows you to borrow money to live in a fourplex. So a fourplex or really any multiunit dwelling, we’re going to call it a fourplex because the numbers just work really easily.
OK. So here’s the scenario. You go out there and you find a fourplex in an area acceptable that you would want to live in and you go put an offer on it and then you put FHA financing in place.
Now FHA financing, the requirement is you have to live there. So you have to reside in one of the four units. OK? So you’re in one of the units but you can put tenants in the other units.
Now where this becomes really easy is if you find a fourplex where there’s one unit open and there’s three units occupied with tenants paying rent already and I will talk about that in a second.
So here are the rough numbers. We will just say for the market, we will just say it’s the Las Vegas real estate market right now. Two hundred thousand dollars is the purchase price. You’re buying the whole building for 200 grand and your monthly payment is roughly $1400. That’s what you pay every month to the bank.
But for each unit, we will say you’re getting $700 per month in rent. So what that means is you’re getting 700, 1400, 2100 a month in rent. You’re collecting that from your tenants. You’re only paying 14 so you’re living in this unit, not paying anything essentially; and you’re getting $700 a month rent. The great thing about this is in months where you don’t have a tenant, you’re still not out of pocket because the two tenants cover the whole amount which is ultimately the way you would like to have it.
You like to have two tenants pay the whole thing. This one pays profit. You pay for free. That interesting thing that I was telling you about with this is that let’s say you don’t make a lot of money and you don’t have a really high income and maybe you can’t qualify for this payment. You’re able to take the rent coming in from them and add that to your income.
You get a partial credit for the rent. So if you say, “Hey look, the fourplex already has three tenants. Here are the leases. They’re long term leases. They’re all staying,” they will add this $2100 to your income and you will have a higher income. You will be able to qualify for more.
So if you’re watching this video and you’re say in California, you’re like, “But we can’t get anything for 200,000 California,” and that’s probably the case.
But the FHA limit in California is much higher. It could be 700,000 some areas, so you just have to take these numbers and ramp them all up. So you’re going to pay more in mortgage payment but you’re probably in parts of California collecting $1200 or $1500 a month rent per unit.
So run these numbers. Figure out if it makes sense and then go find a real estate agent who could find you one of these deals. It’s actually pretty uncommon for people to do this. What typically happens is that investors are buying these, just renting out all four units and getting a really good return on their investment.
You can do it but you have to live in the unit and you can’t play games. This is FHA. You can’t say you’re going to live there and not live there. You have to live there.
Now at some point a couple of years down the road if you have to move out, because you want to move into a single family home, you have to talk to your lender about what your requirements are for doing that. But this is a legitimate strategy. Just people aren’t taking advantage of it but it’s an interesting way to basically live in a house for free and not pay any rent and collect money to live there. So I thought I would share that with you. That’s my update for today and hope to see you on another video. Thanks.