BRRRR with FHA 203k?

Question

Not sure if there is a better forum topic to post this but here I go…

My overall vision/goal is to acquire a multifamily (2-4 unit). Gain equity in this property and then be able to refinance to take me to the next one. Now I want to be able to house hack and BRRRR the first property. Trouble I run into is to whether this is possible through an FHA 203K or not. I also have my puzzle to put together with regards to learning how to operate this with a 203K as it's not your typical FHA.

Does anyone else have experience doing this? I’d love to hear everything you have to offer on this topic.

This is definitely the scariest thing I’ve gotten myself into but life can’t always so boring so here I go.

Also, if anyone personally has done this in the NJ area and would like to network, please do not hesitate to reach out as I’d love to speak!

Thanks everybody for any input you have!

Eric Dietrich · Answer

My wife and I recently did a 203k to purchase a duplex in the Seattle, WA area and it was a fantastic learning experience and amazing ROI.

We purchased a duplex for 300,000 with a 203k loan of 335,000, then because it was a learning experience, another 20-30k out of pocket...a lot of that due to supply chain issues.  Rents were 900/mo for 700 sqft 2 bed / 1 bath units.  We are doing owner-occupied as that is a requirement for at least 1 year with these loans (unless other extenuating circumstances come up that you can document). We have come out the other side with a refinance value of 525k, which we did a cash-out refinance on. Also, rents went to 1350 for the first year (self-managed) and the second lease we have shifted to a PM and getting serious interest in the vacant unit at $1695/month.

A few things I would say to watch out for are:

• Get multiple contractor bids.  Our bids ranged from 30k-50k for the things included in mortgage.
• Use your FHA inspector for everything - we made the mistake of not communicating enough as he is the one that can really crack the whip on the contractors.
• You typically have 6 months from when the loan closes until the construction is supposed to be all buttoned up.
• Try to get as much of the construction complete before you even consider moving in.  We didn't get enough done and had to live in the construction of two units with a 2 year old.
•

We ended doing the following:

• Roof 
• Electrical
• Windows
• Repipe of supply lines
• Crawl space clean-out
• All new landscaping, fencing and a retaining wall
• Paint inside and out
• Gutted bathrooms and kitchens
•

Personally, I would love to keep using this method when my wife and I move to the Philly area in a few months as being able to include all those expenses into the loan over 30 years was less expensive than if we did the project piecemeal due to inflation.  I would just do a lot more of the project schedule management myself to make sure my life isn't chaos.

Ivan Maldonado · Answer

Anyone?