Can I brrrr if I FHA?

Question

Brian Ellis · Answer

Yes they are. 203k loan, the renovation costs are rolled into the loan. So to make BRRRR work, would need to get a huge discount on an already discounted property. It would be difficult to pull out any money when you are already @ 96.5% LTV.

The banks will appraise it based off of its after repair value, and lend $ based off of that. They will even go beyond the ARV by 5-10% (cant remember exact percentage).

1. It is difficult to find reliable contractors.

2. Contractors that do 203k loans take advantage.

3. Interest rate is higher.

Matt Grubb · Answer

@Brian Ellis is correct. It is very difficult to pull any money out after a 203k unless you find a killer deal. I'm currently under contract on a duplex. I'm going with FHA 203k and I heard horror stories about contractors from anyone I ever brought it up to.

If you decide to go with the 203k, my advice would be to find a great HUD/203k consultant before you ever write an offer. They will get you in touch with contractors that understand the process and it gets everyone on the same page from the very start.

Anthony Wick · Answer

@Jacob Dormevil

Yes you can. But it may not be the timeline that everybody talks about on BP. I’m presuming you’re using an fha Loan because of the low down payment. Which means you probably won’t have much equity at the end of your mandatory 12 months live in. It’s still a great way to get started if you don’t have much money. Or if you do have money but want to keep as much as possible for the next quick purchase. That’s what I did. Buy 1 property fha with 3.5% down and buy the next one with 20% down.

James Wise · Answer

Probably not. Key to pulling off a BRRRR is getting the property at a deep discount. Really only way to do that is to buy it in a very distressed condition so that the buyer pool willing to buy it becomes very small. If it's in good enough condition to qualify for FHA financing it's probably going to sell for it's true market value unless you've found yourself an unlisted property being sold by an unsophisticated or ignorant seller. At that point you're just getting lucky due to their extreme lack of knowledge on the value of what they own.

Jacob Dormevil · Answer

I want to use wholesaling to acquire the money needed for the 3.5% down on my FHA loan any tips or advice on getting into my first wholesaling deal.

Jacob Dormevil · Answer

@Jaysen Medhurst thanks a lot man!

Jacob Dormevil · Answer

@Anthony Wick thanks a lot that advice was very helpful

Jaysen Medhurst · Answer

@Jacob Dormevil, technically, yes you can. There are challenges as @James Wise pointed out. You can also consider a 203(k) renovation loan, which can open up more opportunities. Remember FHA loans have 1-year residency requirement, so you couldn't move and rent out the unit you live in until the requirement had been satisfied.

Jay Hinrichs · Answer

JIm are 203k loans FHA ???

Can I brrrr if I FHA?

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