203K or Homestyle to BRRR?

Question

I need some advice on a 203k or Homestyle loan.

I have not yet started down my investment journey other than researching at this point. My husband and I have a two year lease that's up in December of this year. At that time, we would like to buy our first home but also don't want to burn through all of our capital on a primary residence when also looking to invest. With that being said, I've been researching 203K loans. My thoughts are that I can buy a fixer upper, force some sweat equity, and then refi after the seasoning to pull money out to invest. However, everything I've found basically sums up to those types of loans being a giant pain in the ass.

Does anyone have experience with a 203k or Homestyle loan? What was your experience, and do you think my plan is feasible?

Torrell Palmason · Answer

A downside with the 203K is the process is very arduous and one of the requirements is you get contractors bids for all the work, as you are not allowed to do your own work on the home. Also this will go through double underwriting and if the renovation is $35,000+ you must also have a FHA Consultant. If this is the route you choose then I would highly suggest doing your homework and find a lender very familiar with the process so they can truly guide you through the process.Another style you can take is a 1-4 unit FHA loan for 3.5% down that will pass an appraisal but needs updated. Once the property is updated you will have built up equity so refinance out of the FHA and depending on how much equity was built up take out a Cash-out refi or a HELOC to get what you put in back or to reinvest for another venture.Best of Luck!