FHA 203k loan experience?

14 Replies

Anyone have experience using a FHA 203k loan in LA before? Would like to know what lender and contractor you used.

Any contractors out there work with a 203k loan before? I'm planning to do a renovation on a 3-4 unit property using a 203k loan which I hear some contractors don't prefer because payment from the bank can be delayed.

@Mark De sagun I've done a 203k but not in LA. I can say it's an excellent way to launch a real estate investment strategy so well done!

I used Annie Mac for mine. They did a great job and they do lend nationally. They have a lot of experience in my market in 203k loans. I also did a quick search on this platform for contractors certified in LA (http://203kcontractors.com). Believe it or not, there is only one listed in LA: Access Construction and Remodeling (800-267-1756).

There is also one in Ontario, CA: www.premium-cs.com.

You do not have to go with an FHA 203k Certified Contractor, but it is a good place to start. Good luck!

I've done the FHA 203(k) loan in Los Angeles. The contractor I used did it more as a favor so I will need to reach out to others so see who will be on board.

I'm happy to share my experience if you would like.

@Rick Albert Im very curious about your overall experience. I have my clients asking about FHA 203k but in LA, its very difficult to get done. A few brokers in my office have tried but the red tape and time intensity has either killed the deal (seller got fed up after 90 days of escrow) or the property did not qualify.

@Jonathan Taylor I’m happy to discuss. I was able to get it done in about 30 days. We hustled to make it work. Where I had issues was during construction and getting the checks from the lender. It was a horrible experience. I would do it again but definitely with a different lender.

@Rick Albert I closed my house hack (tripled with ADU) with a 203k version but not that exact program. Escrow was 120 days, the 5 month reno took 9 due to delayed payments and constant oversight that were completely useless. But as a loan officer I have not been able to successfully close due in part to the subject properties and in part due to the 203k process. In the end, were you successful?

I had similar issues to you once we closed.  It was a four month project turned into a year.  Part of the issue was the lender not issuing the checks fast enough and the other was the City.  Just like most real estate, time heals all wounds.  We are in the process of refinancing which should save us about $874/month.  Once we move out, the property will cash flow about $1,100 a month on our hard costs.  So in the end it is working out.  I would definitely do some things differently the next time around but glad we did it because I learned a lot and can share it with clients and others. 

I have been looking to House Hack a property through an FHA 203k Loan. I even went so far as to begin the process because it was such an amazing opportunity for around 3% down. When I called on an FHA Broker I found that they no longer offer this product!! I was extremely upset but I was able to find another avenue for financing my properties.

@Mark De sagun

I’ve completed 203k in the LA area. You definitely should ensure you select a contractor that is knowledgeable and has reserves to fund the project upfront and be willing to reimbursed. For my last project I utilized contractor Ken Kinslow (213) 309-7635 and senior loan officer (619) 665-2343 Eric Otfinoski. These two work very well together and have worked on several transactions together which is important for communication amongst all involved.

You'll also need to hire a FHA 203k consultant. My experience with Javier Enriquez (323) 497-2422 was exceptional. He's very timely with responses and worked well amongst the team. His responsibility involves inspecting and appraising property to account for its value post project completion. That said, you definitely need to be clear on the scope of the project to avoid delays.

Wow! thanks for all your helpful responses! This definitely gives me a jump start on my 203k search. Using a 203k seems like the perfect way to combine the benefits of both househacking + BRRRR strategies.

@Mark De sagun

The banks only hold back payment if the contractor doesn’t do the work on the SOR that is developed by you and your 203k consultant.

Any reputable contractor that’s done insurance work or any kind of renovation work for banks has dealt with bank draws before.

You just need to shop around for the professional companies with multiple crews and an office.

Not a fly by night guy.

The 203k is incredibly powerful, and absolutely doable anywhere with the right team.

I didn’t even have a good team on mine, and it was still the best thing I ever done. It finally got my out of the rut of trying every other beginner investor strategy out there.

Originally posted by @Michael Lazzaro :

Can you get a 203K loan on a property with illegal units to bring them up to code or is it only for SFH?

Yes, as long as you get the appropriate variances and permits from the town to make the units up to code, you can absolutely use a 203k loan to add, or renovate the units. 

Sometimes this is challenging, so a good thing to do is look at the immediate area surrounding the property in question. Are there other multiunit properties on the block? If not, sometimes it could be hard to get the variance from the town. You'll have to get approval from the board as well as surrounding neighbors. Just something to keep in mind. 

One cool thing about the 203k is, although the FHA loan only allows the property to be up to 4 units, you can actually buy a 5-unit or 6-unit and convert it back down to a 4-unit, and it will still qualify.