Need advice on how to proceed with deal. HUD 203k help??

Question

Hello all,
Im 22, and graduating from Sacramento State Univ next year with my degree in Construction Managment. I already have my career started with CC Myers Inc as a project engineer, however I wont be making my full salary (70k year) until I graduate in 2008.

Heres the deal- The house I live in now my parents purchased as an investment which I "flipped", and did all the work myself.. complete remodel. As you all well know, the market has taken a turn, and Sacramento has taken a big hit.. I see an opportunity to start home ownership, however I am on my own financially. A 1500 sq ft, 3 br house down the street from me went on the market last week at 219k asking- great structural shape, great neighborhood, but very rough around the edges.. easily a 310k dollar house in good condition. I see a great opportunity for me to purchase the house, get it in livable condition, rent it to fellow college students until I graduate in 2008. By the time the market begins to level out, remodel, and hopefully sell for a profit, or hold for rental income.

My dillemma is that I am financially limited. I currently have a steady career, however I am only making roughly 30k a year since I am part time while I am in school. I can get the 5% down to purchase the home, but Im worried about getting the loan. I have excellent credit (above a 700), and I plan on renting it to make the mortgage ( 1200-1400 month). I was about to give up on the idea of home ownership until I came across FHA/HUDs 203k assistance program. From what I gathered, its for first time buyers who want to buy a house that needs rehab. They basically insure the borrower so that a lender will be comfortable lending 110% of the finished homes value. Sounds great, but also sounds like a lengthy process. Any experience with this???

Basically, Im trying to find out how I can make this deal work on my own- if at all possible. Risk is OK with me, I have a level head on my shoulders, and I realize that risk comes with the game. This house already has 3 offers on the table, and I am confused on how to proceed.
Thanks
-Steve

Account Closed · Answer

Steve,

I will let the mortgage brokers comment on if you can obtain conventional financing.

The market favors buyers. It could be this house will not work for you but another will. What you should be considering is seller financing or subject-to deals. Or even a lease/option deal if the documents really secure your position. If you are only doing a lease/option deal you should not put a lot of money into improvements when you do not control the title.

You are on the right path. Do a deal that works for you. It might take a few dead ends before you find one that really works.

Good hunting.

John Corey

Steven Tankersley · Answer

I just wanted to add a couple things I felt I left off, experience wise...

Im a noob to real estate investing, however I am not a noob to real estate. Im currently working on getting my CA class A engineering liscense, Ive worked in Residential, Commerical, and heavy civil construction and done my fair share of remodels, including the home I live in now (travertine, granite, recessed lighting, new windows, doors etc) which I am lucky enough to live in rent free in exchange for the work I complete on the house. Basically, I want to figure out how to get into this home, rent it until my full salary kicks in once I graduate. I have real foreseeable income, I just need to somehow figure out how to get into a home in the mean time. My stepmom is a real estate agent, my parents own a construction business, and multiple homes in CA; I have lots of advice to pursue this but not much real insight. Theyre just not willing to help me financially on my own deal, which is fine by me. I just think that with the collective knowlege on this forum, I might gain some insight or options that I havent explored yet.

Steven Tankersley · Answer

In sacramento, REOs and foreclosures are happening faster than you can blink. Most people see this is a disaster, but I see opportunity. Im not afraid to buy something that need a bit of work, however I dont think the lease option would work in this case. The homes Im looking at buying are typically homes that need to be paid for ASAP to the bank, or a desperate seller close to foreclosure. In this case, wouldnt the only, and best option to be an outright purchase? Am I just way out of my league here as everyone has been telling me, or is it possible to actually do this (buy a home before I graduate)?

Need advice on how to proceed with deal. HUD 203k help??

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