Need a Team for a Renovation Loan in Maine!

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Need a Team for a Renovation Loan in Maine!

Ken P.
Portland, ME · Member since 2018 · 29 posts · 27 votes

Hi all, I am aggressively searching for a value-add house hack in Southern Maine, specifically within a 40 minute radius around Portland ( Biddeford, Brunswick, Gorham, Westbrook, etc.). I have determined a renovation loan to be a great option for me but I have now had two different potential opportunities fall through on these loans (FHA 203k or Homestyle) because I did not have my ducks in a row before trying to get the renovation loan in place, and I don't want it to happen again because the last thing I want to do is waste people's time and lose out on potential opportunities.

Specifically, I feel I really need to get a team together that has experience working with renovation loans. I'm already working with a great agent (@Harrison Smith) so I'm covered on that front, but I would be unbelievably grateful if anyone who has done one of these loans in Maine could point me toward a lender, a HUD consultant (203k), and most of all a contractor that is familiar with and comfortable with the funding schedule and quote structure these loans require.

Everyone I've talked to in the past initially says "Oh yeah, I can do renovation loans!" and then it turns out they have no experience with them and when it really comes down to it they get cold feet surrounding all the details and paperwork, so I'm really looking for people that have successfully completed these loans, all the way from the offer letter to successful renovation. 

So if you know anyone that has experience with either the FHA 203k or Homestyle renovation loans, please let me know. Also, if you or someone you know has gone through this process as a buyer I would love to talk to you about your experiences as well. 

Or, alternatively, if you have any other proven methods of purchasing properties that need just enough work the bank will not lend on them but not so much work that the price works for hard money, let a guy know, because that is the pickle I continue to find myself in.  

Thanks in advance, see you all at the next meetup. 

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Eddie Gonnella
Bangor ME & Richmond, VA · Member since 2018 · 166 posts · 106 votes
6y

@Peter Brandon

Good luck on this! It is a horribly painful process with all the paperwork, but definitely worth it as a way to get your first deal. I’m just refinancing out of a renovation loan that I did last year. A couple recommendations I have:

1. Go with homestyle - basically the same product but less paper work because there’s no 203k consultant. Unless you’re feeling like you really want that help and oversight, then it may be worth it

2. Use as few contractors as possible. The paperwork is enormous and the less contractors the less paperwork you’ll be chasing down. If you are the GC on a homestyle you’re limited to 3 sub-contractors. I would recommend just finding a GC who can do one set of paper work and they can get as many subs as needed for the project

3. The fees are enormous compared to a regular loan. Just make sure you are budgeting in for extra closing costs. Mine were probably 6% instead of the usual 3%.

4. Understand that you’re probably going to pay more than you would for contractors if you weren’t using this program. The extra paper work and licenses are going to remove a lot of the lower priced contractors from the picture

These are all lessons learned. I tried to scrap together a deal so that I would have the most equity as possible at the end. I used 3 contractors, I had to baby sit them constantly for paper work and scheduling. I also couldn’t get all the work into the loan because I could only use 3, so I ended up having to come out of pocket later on to finish things up. In the end, I got a great deal and built a ton of equity but if I could go back even if it meant paying an extra 10k in rehab costs I would have just found a competent GC to deal with everything. If you want to learn the GC life do it on your next deal where there’s not so much paper work and red tape.

Let me know if you have any questions! Hope this helps

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  • Bill Rich
    Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
    6y

    @Ken P.

    Congrats on taking that next step. Renovation loans like the 203K are not at all difficult if you ave the right team in place, as I can tell you are aware. I do specialize in 203Ks and close about 70 - 80 per year and have closed many in Maine as well. We can find you a HUD consultant as well as possibly a contractor and one of the most important pieces is the draw process, which is something a lot of people overlook. We actually handle the draws in house, not a 3rd party vendor like most lenders. Let me know if I can help in any way.

    0Reply
  • Eddie Gonnella
    Bangor ME & Richmond, VA · Member since 2018 · 166 posts · 106 votes
    6y

    @Peter Brandon

    Good luck on this! It is a horribly painful process with all the paperwork, but definitely worth it as a way to get your first deal. I’m just refinancing out of a renovation loan that I did last year. A couple recommendations I have:

    1. Go with homestyle - basically the same product but less paper work because there’s no 203k consultant. Unless you’re feeling like you really want that help and oversight, then it may be worth it

    2. Use as few contractors as possible. The paperwork is enormous and the less contractors the less paperwork you’ll be chasing down. If you are the GC on a homestyle you’re limited to 3 sub-contractors. I would recommend just finding a GC who can do one set of paper work and they can get as many subs as needed for the project

    3. The fees are enormous compared to a regular loan. Just make sure you are budgeting in for extra closing costs. Mine were probably 6% instead of the usual 3%.

    4. Understand that you’re probably going to pay more than you would for contractors if you weren’t using this program. The extra paper work and licenses are going to remove a lot of the lower priced contractors from the picture

    These are all lessons learned. I tried to scrap together a deal so that I would have the most equity as possible at the end. I used 3 contractors, I had to baby sit them constantly for paper work and scheduling. I also couldn’t get all the work into the loan because I could only use 3, so I ended up having to come out of pocket later on to finish things up. In the end, I got a great deal and built a ton of equity but if I could go back even if it meant paying an extra 10k in rehab costs I would have just found a competent GC to deal with everything. If you want to learn the GC life do it on your next deal where there’s not so much paper work and red tape.

    Let me know if you have any questions! Hope this helps

    4Reply
  • Rob Milliken
    Wholesaler · Union, ME · Member since 2016 · 148 posts · 27 votes
    6y

    @Peter Brandon

    Maybe it would benefit you to use a PML. Then refi when reno complete.

    Call Ryan @

    Lincoln Capital

    796 Forest Ave

    Portland

    He works with investors

    1Reply
  • Tyler Bushey
    Investor · Biddeford, ME · Member since 2017 · 282 posts · 180 votes
    6y

    I agree with Rob, use private or hard money. Easiest route, next single family flip I get under contract I'm actually going to keep and will use hard money

    0Reply
  • Ken P.
    OP
    Portland, ME · Member since 2018 · 29 posts · 27 votes
    6y

    Thank you all for your input, I really appreciate it. 

    @Bill Rich Thank you for your insight on the 203k. Do you have experience with the Homestyle loan as well? Would you say you prefer one over the other in general, or do you feel there are certain cases where one may be better suited? 

    @Eddie Gonnella This is great info, thank you. I am weighing all of my options now to see what will make the most sense for the property I'm targeting. I have not worked with contractors previously so one of my biggest concerns is finding one that will be a good fit to handle both the paperwork and the actual renovation (thus the motivation for my original post) 

    @Rob Milliken @Tyler Bushey Thanks for the suggestion, I am willing to explore this route and I understand the benefits of not having to deal with as much red tape. I'll have to investigate further and make some calls to see if this is the right choice for me this time around. 

    1Reply
  • Bill Rich
    Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
    6y

    Hi Peter

    Yes I do the HomeStyle as well and close a lot of those every year. These loans are not at all difficult to do. Some on here are saying its painful process, but I think that's more a result of the lenders experience and knowledge not the mortgage program.

    0Reply
  • Rob Milliken
    Wholesaler · Union, ME · Member since 2016 · 148 posts · 27 votes
    6y

    Hi Peter, I would like to follow up and see what you chose to do. And how it worked out for you

    0Reply
  • Bryan Devitt
    Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
    6y

    @Peter Brandon the reason it is tough to find a GC is because the GC has to float most of the money while waiting for draws. The draws are coming from a bank, so they should be safe but you never really know. If there is a chance you can float $50k and not get paid for months or ever, it is tough to take on that job. As a contractor we have to charge more to make up for the risk of carrying that loan and as incentive to our subs to be willing to wait a month or two for a job they normally get paid that week for. Waiting on the bank inspections and checks also drags out the process, so what would normally be a streamlined 6-10 weeks is usually 3 - 6 months. The only one I know of that does bigger jobs that I trust him and his work is GW Woodworks out of Gardiner but I don't know if he has dealt with 203k loans before.

    0Reply
  • Paul Welden
    Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
    6y

    I can personally vouch for @Bill Rich. He and his bank are experts at all types of renovation loans. 

    Select your partners wisely - Realtor, Lender, 203k Consultant, and Contractor

    REALTOR - it's recommended to work with one that has done a 203k in the past so they know what verbiage HUD wants to be added to the purchase offer contract and how to structure the deal. 

    Lender - advice you to select a lender with verified 203k experience; the lender is the quarterback in the process, controlling the rules, paperwork, processes, procedures, and if the lender does not have sufficient experience with the 203k, your entire process can look like the Cleveland Browns on a Sunday afternoon. 

    203k Consultant - the lender is responsible for selecting the 203k Consultant (refer to Lender paragraph above); The 203k Consultant determines the scope of work and pricing for the project and inspects the completed work. 

    Contractor - strongly advise you to select a contractor with the accreditation as a Certified 203k Contractor; keep in mind that the contractor does not set the pricing (see 203k Consultant info above) but does need to know the different versions of the 203k, payment methods, timelines, paperwork, and processes; definitely don't want to work with a contractor who is going to "wing it" on a 203k.

    You're only as strong as your weakest link. So, select your partners wisely.

    0Reply
  • Bill Rich
    Lender · Marlton, NJ · Member since 2016 · 126 posts · 44 votes
    6y

    @Paul Welden thank you for the recommendation!! 

    0Reply
  • Randy Forcier
    Rental Property Investor · Biddeford, ME · Member since 2017 · 22 posts · 6 votes
    6y

    @Ken P. I believe we met at a BP Meetup at Run of the Mill a few months ago...

    Outside of Real Estate Investing I'm a Loan Officer with Norcom Mortgage in Saco, ME and I actually know @Harrison Smith pretty well. I have a lot of experience with Fannie Mae HomeStyle and/or FHA 203Ks Loans and would be happy to have a phone discussion or meet for a cup of coffee some time to discuss more.

    Happy to help a fellow BP Member any way that I can.

    1Reply
  • Ken P.
    OP
    Portland, ME · Member since 2018 · 29 posts · 27 votes
    6y

    Thanks everyone for the insight. I'm under contract and going with a Homestyle Loan. I definitely agree with all the benefits of hard money but it just didn't make any sense for this property when I ran the numbers. 

    Biggest challenge right now is I am told I can only use one single GC - seems like this has changed somewhat recently from when you could manage multiple subs yourself. The property doesn't need much, a new roof (it's leaking) and some minor interior work here and there, mostly drywall and a window or two. It's probably 95% roof 5% interior. The issue is roofers only want to do roofing and not wanting to touch the interior work, so I really need an actual GC who can sub out whats needed. If anyone has someone they can recommend that services the Portland area please let me know, we are on an aggressive closing schedule I am trying as best I can to hit.

    0Reply
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