Updated about 6 years ago on . Most recent reply
Diary of an FHA 203k Loan Deal
Hello BiggerPockets family!
Well, it's official. After a lengthy process, I have finally put my first personal residence under contract. It is a 4-unit apartment building, which will allow me to utilize FHA 203k financing. If you haven't yet, I highly recommend you check out the article Brandon Turner wrote for BP that details how to "Hack Your Housing," and is what I am currently attempting to do. http://www.biggerpockets.com/renewsblog/2013/11/02...
I will keep this updated as a blog, as to show all details regarding what is happening with my deal. That way others can learn from what I am doing, and hopefully take it upon themselves to do the same. Here is a little bit about the deal:
4-Units--(2) 2BR, (2) 3BR.
Purchase Price: $85,000
Rehab Needed: $85,000
Total Purchase Amount: $170,000
Total Loan Amount: $164,050
ARV: $210,000
ARV Gross Monthly Income (3 Units Rented) = $700*3 ($2,100)
Less 10% Vacancy: $210
TOTAL OPERATING INCOME: $1,890
Taxes: $321.50
Insurance: $200
Maintenance Reserve: $210 (10% of gross monthly income)
Mortgage Insurance: $215
TOTAL OPERATING EXPENSES: $946.50
TOTAL NET OPERATING INCOME: $943.50
Loan Amount: $164,050
Term: 30 year fixed/30 year amortization
Interest Rate: 4.75%
Debt Service: $855.76
NET MONTHLY CASH FLOW: $87.74
So, as the saying goes, the numbers are just that--numbers. Now it's time to go make them a reality. I start making moves on Monday, when I hire my FHA Consultant, which is mandatory to walk you through the 203k process with any rehab exceeding $35,000. I will be back to update when possible. Let me know your thoughts--and a special thanks to all who got me to this point. Moving right along!
Most Popular Reply
100k is a pretty big renovation. I think they look like they are in decent shape but dated.
If it was me I would take it as is, and do light rehab, paint carpet etc. I would also have get rid of the blue tub and shower by reglazing them a simple white ($300) replace the toilet (there was one at Sam's club for $98) today and get a sink and cabinet combo for the bathroom from Home Depot for a few hundred bucks.
Then I would move into a unit and start buying things. since you don't have rent to pay every payday go shopping, get paid and go buy a couple of kitchen upper cabinets, then some lowers, etc etc, etc. Once you get to the sink basin then have the kitchen gutted and do a paint and install. (Hint: Habitat for humanity will come take out the cabinets for free if they are in decent shape, much faster and easier then ding it yourself and having to rent a dumpster). Work your way through the house room by room and when you are done then move next door and rent your place at the higher price. with the increased rent you will have more cash to put into your rehab so it will go faster, rinse and repeat.
I have a friend that built her house this way. She bought the land and poured the foundation, and framed the exterior with a small loan from family, then every week added just a little. She retired when she was 34 on a customer service salary.