Would this work for BRRRR

[Caleb Scott]

So say I find a rundown multi family. Is it reasonable enough to do a 203k loan, so that I can tie in my rehab costs with the mortgage, and if so how is the amount allocated for the rehab assessed and approved? Do I choose? Also is it reasonable to do a brrrr house hack? And if so when I refinance (if all goes to plan) at the 6 month mark, could I move out not currently having to go through an entire year to fulfill the usual FHA terms? Or is it new loan new rules allowing me to move and put the money from that deal into the next one?

Thanks for the help. I feel that If I can pull off one successful investment that makes monthly cashflow I’ll be able to just repeat and learn and be able to support my girlfriend and I and give us the life we’d like. 

[Andrew Postell]

@Caleb Scott I'll answer these one at a time if you don't mind:

Is it reasonable enough to do a 203k loan, so that I can tie in my rehab costs with the mortgage, and if so how is the amount allocated for the rehab assessed and approved? - yes, as long as you live in the property. The rehab amount is allocated based on your contractor bid and your FHA consultant (who acts as a project manager.

Also is it reasonable to do a brrrr house hack? - Maybe after the rehab is done?  If you are renting out the other units/rooms it would be reasonable to assume a potential tenant would want the rehab to be completed before they moved in.

When I refinance (if all goes to plan) at the 6 month mark, could I move out not currently having to go through an entire year to fulfill the usual FHA terms? - No, absolutely not.  You will sign documentation stating that you will plan to occupy the property for 12 months.  If your intent is not that, then that's fraud.  So let's not do that.  Once the rehab is completed, the loan is still an FHA loan.  You aren't refinancing going this route.

Now, the realistic expectation here is that it might be hard to compete making offers with an FHA loan right now.  Especially if it takes longer to close than your competition loans that are bidding against you with the property.  The economy is changing rapidly right now so that might change but currently these loans are not competitive in the market. 

Hope all of that makes sense but feel free to ask anything additional if you need.  Thanks!

[Andrew Garcia]

Hi @Caleb Scott, I am assuming that by "multifamily", you mean 1-4 units.

In that case, you can do a 203k loan. The amount allocated is determined by a HUD consultant assigned to the property.

You can certainly do a BRRRR house hack. You would have to live in the property for one year, however. Then, if you want to refinance, you will be limited to 75% LTV on the cashout refinance so you will need to likely bring cash to the table unless the value add creates enough equity for you.

Hope this helps! Let me know if I can be of any assistance.