I live in Northern California and am plotting my investment strategy for the coming 2019 year. I've been floored by the prospect of a 203K / Homestyle loan, but have yet to crack the code on how I could make it cash flow for me with only 3.5%-5% down (in the Bay Area at least....)
After speaking on the phone with a loan broker, I was told that you could go as far as building an entire property with a 203k loan as long as there is an existing foundation. I believe you can even pull the FHA Duplex Loan limit to turn a Single Family Home into a Duplex.
My gut tells me this is a very powerful tool that I haven't cracked the code on fully, just yet. I'll list several of my questions and if anyone has experience or thoughts, feel free to tackle any or all of them.
- Has anyone found a good way to cash flow with these loans?
- Has anyone ever built a home from scratch with an FHA 203K (acquiring land with just a slab on it?)
- Has anyone turned a SFH into a 2-4 unit building with a 203k?
- In a market like the Bay Area where the price to rent ratio is 38.5 - 45.88, is it cheaper to build vs. buy existing?
@Patrick Nissim the 203k loan is a powerful tool, but it has some pretty significant limitations in the multifamily space. I just had a client close on a very nice 3 unit in Berwyn, IL using an FHA 203k streamline loan. I also have had two 203k deals fall apart in the past 6 months. The thing with these deals is they are way more complicated than just buying a fixer upper an renovating it. If you can, use a "streamline" loan which has the least amount of red tape. The streamline loan allows you to buy a property that is beat up using an FHA loan.