FHA Loans for Investors: What You Can (and Can’t) Do

FHA loans are best known as low-down-payment mortgages for first-time homebuyers. But savvy real estate investors know they can also be a powerful tool to buy multi-unit properties with just 3.5% down.

That said, FHA loans come with strict rules that every investor should understand—especially if you’re looking to house hack, scale a rental portfolio, or BRRRR your way to financial freedom.

In this guide, we break down what you can and can’t do with an FHA loan, how to qualify, and when it makes sense to use this strategy to launch your investing career.

What Is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, designed to help more people become homeowners with:

• Low down payments (as little as 3.5%)
  
• Flexible credit requirements
  
• Competitive interest rates
  
• Owner-occupancy requirement (more on that below)
  

FHA loans are issued by approved lenders and backed by the government—making them less risky for lenders, but more regulated for borrowers.

Can You Use an FHA Loan to Buy a Rental Property?

Yes—if you live in the property.

That’s the key. FHA loans require the borrower to occupy the property as a primary residence for at least 12 months. But there’s a powerful loophole:

✅ You can use an FHA loan to buy:

• A duplex, triplex, or fourplex
  
• A single-family home with an accessory dwelling unit (ADU)
  
• A home you plan to house hack
  

As long as you live in one of the units, you can rent out the others—generating income while living nearly rent-free.

What You Can Do With an FHA Loan

✅ Buy 2–4 Unit Properties With Just 3.5% Down

This is one of the most accessible paths to multi-unit investing. You can buy up to 4 units and qualify with rental income from the other units (subject to guidelines).

✅ House Hack and Live for Free

Live in one unit, rent the others, and offset your mortgage. Perfect for new investors building equity with low capital.

✅ Use Rental Income to Help Qualify

FHA allows projected rental income from the non-owner-occupied units to be counted toward your qualifying income—based on a 1007 rent schedule from the appraisal.

✅ Refinance Into a DSCR or Conventional Loan Later

Once you’ve met the 12-month occupancy requirement, you’re free to move out, refinance, and turn the whole property into a rental.

What You Can’t Do With an FHA Loan

❌ Buy a Non-Owner-Occupied Investment Property

You can’t use an FHA loan to buy a home you don’t plan to live in. No second homes, vacation rentals, or investment-only properties allowed.

❌ Use for Short-Term Rentals (Legally Speaking)

Technically, FHA loans prohibit using the property for STRs like Airbnb during the required owner-occupancy period. After you move out? That’s fair game.

❌ Own Multiple FHA-Financed Properties

You can only have one active FHA loan at a time, with few exceptions. So plan carefully if you’re using it to get started.

❌ Skip the 12-Month Occupancy Requirement

You must certify intent to live in the home for at least one year. Violating this is considered mortgage fraud—don’t try to game the system.

FHA Loan Requirements for Investors

Here’s what you’ll need to qualify:

Note: The 2025 FHA loan limits vary by county—use HUD’s lookup tool for exact figures in your market.

Pros and Cons of Using FHA as an Investor

✅ Pros:

• Buy a 4-unit property with <5% down
  
• Use rental income to qualify
  
• Build equity fast through house hacking
  
• Lower interest rates vs conventional
  
• Ideal for first-time buyers/investors
  

❌ Cons:

• Mortgage insurance required (upfront + monthly)
  
• Owner-occupancy is mandatory
  
• One FHA loan at a time
  
• Property must meet FHA habitability standards
  
• Limits your flexibility in future acquisitions
  

Strategy: FHA House Hack → Refi → Repeat

Here’s how many smart investors use FHA loans:

1. Buy a duplex/fourplex with FHA financing
   
2. Live in one unit, rent the others
   
3. After 12 months, move out and refinance into a DSCR or conventional loan
   
4. Repeat the process using new financing on the next property
   

This is a perfect way to stack rental properties using low down payments, especially if you’re short on capital but long on commitment.

Final Thoughts

FHA loans aren’t just for first-time homebuyers—they’re a powerful tool for first-time investors too.

By understanding what you can (and can’t) do, you can use FHA financing to:

• Launch your real estate career
  
• House hack into positive cash flow
  
• Build equity fast
  
• Transition into a scalable portfolio strategy
  

Just remember: you must follow the rules, especially around occupancy and use, to avoid legal issues and maintain eligibility for future financing.