FHA 203K Loan purchase from an LLC

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FHA 203K Loan purchase from an LLC

Davian M.
Rental Property Investor · Florence South Carolina · Member since 2013 · 36 posts · 4 votes

Hello,

Our LLC made a cash purchase on a mixed use building. We wanted to know if we could use a FHA 203K loan in our individual names to buy the building from our LLC?

To give you some context we purchased the building under value with a decent amount of equity. Going the FHA route to purchase the building at full value you would give us a profit to fix the commercial unit.

Is this feasible or does anyone have any experience with this method? Thank you for any insight we greatly appreciate it.

Dave

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  • Matthew PorcaroBusiness Member
    Lender · Long Island, NY · Member since 2016 · 456 posts · 336 votes
    5y

    I can't see why not, but the underwriters on the loan are going to be looking at this hard to make sure you're actually living there. This is an owner occupant loan, so they're going to need to see intent that you're actually occupying the property and not using at a fix and flip loan. 

    This really is a question for your lender. You could ask a few different one's to get their comfort level on it. 

    Definitely keep me posted on what you hear back, I'm curious about this one. 

    The 203k Way
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  • Davian M.
    OP
    Rental Property Investor · Florence South Carolina · Member since 2013 · 36 posts · 4 votes
    5y

    @Matthew Porcaro thanks for the response. I intend to live in one unit and rent the others. The goal is to use the equity to renovate the store front since FHA funds can't be used for this aspect of the deal. More to follow. Thanks again.

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  • Paul Welden
    Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
    5y

    @Davian M. Keep in mind that FHA has an anti-flipping rule where the FHA borrower cannot get a loan on a property until the current owner has owned it for a min of 90 days.

    FHA also has a rule about buying property from a related person/entity which could require a higher down payment.

    FHA may also use the most recent sales price as the value and not what you think you have in equity.

    Check with your lender for more details. Even better, read HUD SFH 4000.1 which is 1,100+ pages of HUD/FHA guidelines.

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  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    5y

    @Davian M. the answer here is sort of.  So to purchase a property from an "interested party" you will be limited to 85% of the purchase price....essentially 15% downpayment.  And as mentioned above anti-flipping rules would apply.  Get prequalified.

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  • Davian M.
    OP
    Rental Property Investor · Florence South Carolina · Member since 2013 · 36 posts · 4 votes
    5y

    @Paul Welden thank you, this is very helpful. I called a few lenders and no one could really answer the question. I’ll start with the end in mind going forward. Again thanks for your insight.

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  • Davian M.
    OP
    Rental Property Investor · Florence South Carolina · Member since 2013 · 36 posts · 4 votes
    5y

    @Andrew Postell thanks for your insight. All great perspectives to help going forward.

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