Did You Know You Can Use An FHA Loan To Become A Real-Estate Investor With As Little As $5,000?

If you think the barrier to entry for real-estate investing is too large, you may not be aware of all of your options. There's one type of loan that can really jumpstart a career in real estate. 

What To Know: You can get started in real-estate investing with as little as $5,000 using FHA loans — government-backed mortgages that help people in less than ideal financial situations buy a home. 

In order to qualify, you have to be able to make a 3.5% down payment, have a 43% debt-to-income ratio and a credit score of at least 580. There are several types of FHA loans available, but a common option for those who aspire to become investors is a 203(k) rehab mortgage. 

According to Business Insider, Ludomir Wanot and his brother used an FHA loan to buy his first home for $138,000. Without the FHA assistance, they wouldn't have been able to afford the $30,000 in work that needed to be done.

Using the rehab mortgage option, Wanot and his brother were able to purchase the home for less than $10,000. 

Wanot eventually parlayed that success into a new career. He gave up a six-figure position at Amazon.com Inc AMZN to pursue real estate full-time as co-founder of Evergreen Housing Network.

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Another real-estate investor, Karina Mejia, bought her first home at the age of 22 using an FHA loan. She bought a three-family home for $560,000 and only had to put down about $20,000.

Mejia lived in one of the units and rented the other two, which nearly covered her entire mortgage payment, she said.

Without having to burn through savings with a house payment of her own, she was able to buy a second property just one year later.

Avery Heilbron's story is another case study. He purchased a $525,000 multi-family property by using an FHA loan with just $18,000 down. 

After about a month of renovations, he moved in and began renting the upstairs unit to a family for $2,400 per month. He also took on roommates in his unit and brought his monthly income from the house up to $3,600, which covered his $3,300 mortgage payment and then some. 

Instead of paying rent, he began living for free and generating cash flow on top of it, which allowed him to save up and buy a second property about a mile away less than one year later. 

So who got started with just $5,000? That would be Natia and Jervais Seegars, who purchased a $191,000 home with less than $5,000 in savings. The couple qualified for a $5,400 grant via the Genesis Program, which offers down payment help for low- and middle-income home buyers using FHA loans.

There are many options out there for those looking to get into real estate, and FHA loans are just one way to get your foot in the door without saving up a ton of cash for a down payment. 

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This story is part of a new series of features on the subject of success, Benzinga Inspire.

Photo: Oleksandr Pidvalnyi from Pixabay.