FHA 203k, is this a good option for buy and hold

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FHA 203k, is this a good option for buy and hold

Lawrence Cox III
Highlands, TX · Member since 2013 · 18 posts · 3 votes

I have been looking at the FHA 203K loan. Not sure if this is a good tool to buy and hold for investment properties, does anyone have any advice on using this option. I am currently looking at foreclosures in my area that I could by low and do enough to get it rent ready. I have been wondering if using a hard-money loan would be a better option? I have never used that type of option, can anyone give me any advice on how to get going. Thanks in advance for any and all advice.

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  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    9y

    @Lawrence Cox III there are very few instances I can think of where hard money is a good idea...use it as a lender of last resort...and if you are going to re-fi to get out from under a hard money loan, make sure your figures on ARV are rock solid. Aside from that 203K is not a horrible option for a primary residence (not an investment)...the one thing to remember is that the renovation costs are tacked onto the loan...so if your loan is $100k with $30k in rehab, your final note payment is on a $130k loan.

    That said, you can always refinance to a non FHA product and turn it into a rental...though you likely won't be in any type of instant equity position...

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  • Alyssandria L.
    Investor · Chicago, IL · Member since 2017 · 9 posts · 0 votes
    9y
    We did a 203k for our 3 unit and you only have to live there for a year. At least that was the rule 4 years ago. We also refi out of it for better rates. One thing I will say is there's a lot of paperwork involved and extra expense due to needing a FHA inspector to inspect the project and then release the funds to the contractor. The up side - if it's your first rehab/multi unit it gives you some protection as you're learning.
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