FHA/Rehab Loan

9 Replies

Hi Guys,

I have a potential house right now that I am looking at. Massive 3700 square foot three unit house in Down Town Buffalo. The house needs a heavy amount of work roughly around 60k in renos depending. It requires a cash purchase or FHA/rehab loan as it will not pass inspection right now. The house is asking for 120K and once rehab is completed the house will easily be worth 230K and up. If an entire house renovation is done (not just whats needed but cosmetically as well) the house could be worth almost 300K as houses in the area that have one less unit are selling for that range right now.

First floor apartment has 3 bedrooms-can rent for 900+, Second floor has 2 bedrooms-can rent for 800+ and third floor has two bedrooms-can rent for 500. 

My question is, who has worked with FHA/Rehab loans before as I am very inexperienced in this field and it makes me nervous but this could be a massive opportunity that I do not want to miss out on simply because of inexperience. Stories, experiences, knowledge is all welcome, anything you may know or have gone through with this would be great.

Thank you for your help!! 

I just closed on my 203k property.

Do you have a good team in place? Lender, realtor, contractor...

This loan is more involved so you really need a team that responds quickly.

You need to name a general contractor that is ok with doing paper work and probably redoing it a time or 2 as they are picky on how it is done.

Let me know if you have any specific questions.

I have a great Lender and a great Real Estate Agent but I do not have a Contractor. I was not sure if that is supplied by me or the Lender. I'm guessing my Lender would have some recommendations for who to use?  

with the amount you're looking to rehab, you'll need to go with a full 203K loan.  I would look for a contractor who has experience with this type of loan/process.  There are some hoops you need to jump thru and you will have to work with a 203K consultant.  

You should be able to find a local lender, realtor, and contractors in your area that are familiar with the 203k loan process.  They will be your best sources of information on this.

Best of luck.

I am about to finish up the rehab phase of a 203k in several weeks. 

I found several contractors on 203kcontractors.com and had them all walk the property and put together a proposal for me. I selected the contractor that worked best for me and pushed forward. 

You also need a HUD Consultant.

If you dont have any estimating experience, be careful with analyzing properties. Just as a reference, my 1000 sqft, 2bed 1bath rowhome received a full gut rehab and it cost me $68k with mid-level finishes. Seeing that you threw out 60K for 'a heavy amount rehab' in a 3700 sqft house sounds really low. 

I would get contractors in the house before even submitting offers. You dont want to put yourself in a bad position. 

Feel free to ask more questions. 

Thank you for the 203kcontractors.com website Kyle I will more than likely need to use that.

I do not have a HUD Consultant where can I locate one? I thought this was tied in with my lender but apparently not.

You are probably right amount my rehab estimation. I am not very good at estimating and that 60K estimate might simply be to get the house to pass inspection and not including any cosmetic work. 

When you say you had all the contractors walk the property and put together a proposal for you, did you do this before you put in your offer? Or did this take place after your submitted offer? I ask because you recommended I get the contractors in the house before even submitting my offer.

Thanks for the 203k site! Really helped with my search as well! +1

@Joseph Schriever

My loan officer recommended me a HUD consultant. I just searched 'HUD Consultant" on google and it led me to the HUD.gov site...you might want to check there. The company my HUD consultant worked for was Pillar to Post. They are an inspection company but he did 203k's on the side. You might want to find a local inspector and see if he does 203k's or if he has any recommendations.

I definitely had my contractors walk the property BEFORE i submitted my offer. Without a qualified bid, i have no basis to put together an offer. I had the realtor give me the lockbox code (not always kosher) and brought in contractors at different times. 

Once you get a good bid, you can figure out how much you want to spend in total, then make your offer based on that.

If you just throw together a random offer and it sticks, you might not leave yourself enough budget for a complete rehab...or end up spending more than you want (depending on what youre qualified for)  

Originally posted by @Michael Noto :

You should be able to find a local lender, realtor, and contractors in your area that are familiar with the 203k loan process.  They will be your best sources of information on this.

Best of luck.

 sorry, but that is a boiler plate post that doesn't help anyone...

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