Own home at 20% down payment vs getting an investment property using FHA loan

For the last 5 years, I've tried to put myself in a position to buy a home by saving a minimum 20% of the cost of the home for a 30-year loan (or possibly 15-year depending on my financial situation in the future). My goal is to own a home comfortably and support a family down the road.

My current scenario is as follows:

  • Current age: 26

  • Intended home ownership age: 31

  • Home price target: ~$350,000

  • Current income: $60,000

  • Current saved: $40,000 (excludes additional savings from 401k & IRA)

  • Debt: $0

I am also in a relationship of two years with a girlfriend that has a salary of $30,000. We plan to move in together early 2018 at an affordable apartment for rent until we are ready to move forward with our relationship. After marriage is when we would look to buy a home.

I've been set on this plan for a while but recently, my girlfriend's stepfather who is very successful in the real estate market offered another option. Instead of renting, he suggested to buy an apartment using a FHA loan and live in it a few years. Eventually, this would be converted into an investment property by refinancing into a conventional loan, moving out of the apartment into a home, but keeping the apartment to rent out as another source of income. I will admit that I do not have a strong understanding of this strategy, but this video does a decent job of explaining it:

How to gain and investment property using an FHA loan

So out of the two paths presented, which makes the most sense?

  1. Rent for a few years to continue saving for a home at 20% down.

  2. Own an apartment using a FHA loan, convert to an investment property after a few years, and then buy a home.

More real estate tips at Program Realty Wix site


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