Construction loan vs FHA 203k on a flip

Member since 2021 · 6 posts · 3 votes

Hi,

I'm looking to buy a 3 unit property in NYC and to do a full gut, also there's a potential for another 1000sq to be added to the property

and that's why i'm interested in this deal. I've never done this before so i know it's pretty crazy of me doing it in NYC for as my first but hey..

Of course i'll be having a very experienced GC to do the work and also maybe as investor.

I'm planning to purchase the property with 10% down as primary and was wondering what would be the next step regarding construction or FHA 203k

Has anyone done a flip with a construction or FHA 203k loan and whats the experience?

Also any experience, advice is highly appreciated!!

Thank You

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Ecaterina Katerina Morosan

Real Estate Agent · Miami, FL · Member since 2022 · 238 posts · 102 votes

Go big or go home! :D NYC is a great market. Just make sure you work with a team of agent/lender/attorney who have done this already. It's all about numbers at the end of the day regardless of the market. Happy to share my 203k contacts if needed. Good luck!

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Paul Welden
Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
2y
@Marko Bukva
As long as you be living in 1 of the units as your primary residence, then you can do an FHA 203k.
If this property will be a flip or you will not live in it as your primary, then you can do a conventional rehab loan like the Homestyle or the CHOICERenovation.
All these rehab loans are easy to do with the right lender and Certified 203k Contractor.
Hope this helps!
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Nadeem Alamgir
Real Estate Agent · Member since 2023 · 831 posts · 577 votes
2y
Have you considered a more investor-friendly/landlord-friendly market with a lower cost of entry?
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Ecaterina Katerina Morosan
Real Estate Agent · Miami, FL · Member since 2022 · 238 posts · 102 votes
2y
Go big or go home! :D NYC is a great market. Just make sure you work with a team of agent/lender/attorney who have done this already. It's all about numbers at the end of the day regardless of the market. Happy to share my 203k contacts if needed. Good luck!
1 Reply
Doug Smith
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
2y
I think a lot of people get stuck on the 203K, but there are options for renovation loans that are Conventional, VA, and USDA in addition to the FHA 203K and real estate investor loans (ground-up construction, flip, and DSCR). Most of our business is non-203K renovation loans...both for consumers to occupy and for investors. I don't lend in NY (we do investor loans in most of the country and consumer loans only in FL, but we do nothing in NY), so I don't have a dog in the hunt here, but don't discount other types of loans, including a loan designed specifically for flipping. The rate might be higher, but the ease factor might be better. You simply need to weigh those options.
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Marko Bukva
OP
Member since 2021 · 6 posts · 3 votes
2y
Quote from @Paul Welden:

@Marko Bukva
As long as you be living in 1 of the units as your primary residence, then you can do an FHA 203k.
If this property will be a flip or you will not live in it as your primary, then you can do a conventional rehab loan like the Homestyle or the CHOICERenovation.
All these rehab loans are easy to do with the right lender and Certified 203k Contractor.
Hope this helps!

@Paul Welden Thanks for info sir. I'm already looking into CHOICE and SONYMA loans
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Marko Bukva
OP
Member since 2021 · 6 posts · 3 votes
2y
@Ecaterina Katerina Morosan Thats the spirit! NEW YORK or Bust! :-)
jk..i already own a couple of properties down in FLL and i always wanted to buy here.
There's also unused FAR of ~1000sqft so it make this deal even more interesting.
Thank You so much Ecaterina!
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Thomas Santella
Real Estate Agent · NJ & NY · Member since 2022 · 98 posts · 53 votes
2y
@Marko Bukva Do you have an idea of cost of reno and addition? It might help to meet with an architect to give you a base idea and preliminary plans for your GC to then take a look at. This way, you can get a more accurate # to know what type of lending suits you better. With the amount of work you are doing, I would assume you are going to at least break even or even cashflow pretty well, which is extroadinary in NYC! I am an agent in Brooklyn and just started investing in MF down in FL also, but haven't had the guts to take on a flip in NYC just yet! Good luck with everything and let us know how it goes!
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Jared W SmithBusiness Member
Architect · Westchester County, NY · Member since 2018 · 681 posts · 476 votes
2y
Quote from @Marko Bukva:

Hi,
I'm looking to buy a 3 unit property in NYC and to do a full gut, also there's a potential for another 1000sq to be added to the property
and that's why i'm interested in this deal. I've never done this before so i know it's pretty crazy of me doing it in NYC for as my first but hey..
Of course i'll be having a very experienced GC to do the work and also maybe as investor.
I'm planning to purchase the property with 10% down as primary and was wondering what would be the next step regarding construction or FHA 203k
Has anyone done a flip with a construction or FHA 203k loan and whats the experience?
Also any experience, advice is highly appreciated!!
Thank You
For a project of this nature, you're also going to need and Architect & Engineer on board for filing, permitting and required inspection... along with a slew of other things to be aware of. In NYC, yes it can be very lucrative but it could also bury you for the information you don't know that you don't know.
203k Construction loans are a whole different animal. I have not had a good track history with these loan for new investors/buyers. Most of the liaisons that the lender provides for "guidance" are not local and don't know the ins and out of construction in NYC. This is huge when it comes down to the review of the Contractor's costs and if what they say something will cost is accurate. I had a 203k loan project where the GC estimated about $4k for concrete foundation underpinning. Yes, underpinning under an attached row house in NYC. real cost was almost $100k when factoring the specialized foundation work, third party Special Inspection Agency inspections and NYC DOB fees. GC was inexperienced and owners didn't want to do the foundation work despite it be needed. I walked away from job.
-Jared W. Smith, RA - Principal Architect at Architect Owl PLLC (Licensed in NY & CT)

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