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Coach
You can’t buy a second property with the same loan. You have to get a new loan.
I’ve seen some companies have programs for second homes with only 10% down. You’d have to qualify without showing any rental income.
You’d have to check with the bank on what flexibility would exist for you to rent out either property under your mortgage terms. People do rent homes when their mortgage technically don’t allow for it, but I can’t necessarily promote that strategy as risk free either.
Coach
For your profitability question you have to evaluate what return you’d get in both net income and in building equity over time. If it’s better than that down payment amount would do in the market then it could be a good financial move. But keep in mind, landlord responsibilities come along with this type of investment, so making 1-2% more than the market may not be worth it. You have to evaluate the deal accordingly.
Was the 3% down an FHA first time loan? You only
Get to take advantage of that once (twice if you are married and the mortgage is in the name of each spouse separately) Buying a secondary residence is not an investment property, and the rate & terms should sit somewhere between investment property and primary residence. Moving into your 2nd property is a totally valid reason to get a new primary home loan but you have to actually do it. Your mortgage should spell out potential issues with getting a loan under false pretenses (i.e. Mortgage Fraud). As to your last last question, I think you need to sit down and learn a little bit more about the economics of rental properties, particularly in the current high interest rate environment.
Mentor
I think you meant to say same type of loan instead of the exact same loan. You can continue to buy residential properties as many times as you want. The caveat being that you have to live in those homes for a certain amount of time to not break any clauses in your mortgage agreement. This is typically done using the house hacking strategy in which people buy properties using conventional mortgages, live in one unit or room, and rent out the rest. After a year they move out and rent the whole property, basically buying an investment property with the same terms as residential mortage. The caveat is you do sacrifice a lot of privacy this way, you have to move around a lot, and let’s face it a lot harder to do once you have a spouse and kids.
In regards to profitability, you have to see if the current rent you would charge covers all your monthly expenses. After the you look at the rate of return of your profit over what you put down (down payment, closing cost, renovations) if the rate of return is larger than what you can get in other investments vehicles and it worth it to you to put in the work of being a landlord, then it would be a good investment. That said the high interest rates has made it very difficult to find profitable properties. It’s not impossible, but it not like 2 years ago where you could blindly pick a house and make money.
I’m in the process of doing something like this. I don’t have a lot of equity on my primary residence, but just enough to make a 20% downpayment to an investment property (HELOC). I’m excited and nervous at the same time. First time investor here. 😬
Subject Expert
You don’t