All Forum Posts by: Jeff Onofrio

Yes this is true.  Its a great feature that the 203k allows.  The amount of future rent is determined by the appraiser and will be noted in the appraisal report.  

@Rudy Cecere - I have to agree with above. Also an agent who tells you that 203k loans are a pain in the a** might have had a bad experience with an inexperienced 203k lender. These loans are not that difficult at all when working with the right lender, HUD consultant and contractor.

My recommendation would be to find the right team and then go with that team to the agent. It can make it a much smoother process. Not all HUD consultants, contractors or lenders are the same or there level of expertise. Interview them as you would an agent.

203k's might be a little more work for your agent but for the instant equity and cash you keep in your pocket to me its a no brainier- this of course is if you plan to occupy one of the units as it is only for owner occupants (House Hacking is the way to go! )

Homestyle will not work bc it only allows for a single family investment property.  So that is correct.  203k is primary only. 

Looks like your cashout strategy is your best option. 

          @Joshua Martin - this is great. I love great stories like this when the 203k is the vehicle used to help to make this happen. I had a question for you- why did you need a HUD consultant? Your budget was below the 35K limit for a Limited 203k- were there structural issues that made your lender require it? I am actually a proponent of "house hacker's" (specifically first timers) having a HUD consultant to protect their interest, if of course, the HUD consultant is capable. I actually teach Realtors classes on how to use the House Hacking method in order to create a stable of young investors. Its a great idea and the 203k, while expensive, if you have the right lender you can get them done in 30-45 days without question. I tell my clients to build the loan cost into there analysis when working up numbers on a potential project and make your offer accordingly.

Again congrats and hope this is one of many for you to come! 

@AlexGallardo 

FHA 203k Advantages: 

• Creation of instant equity
• 3.5.% down of the purchase price and the rehab costs
• Can be used for primary residence with 1-4 units (could also be looked at as a disadvantage)  
• When using 2-4 unit property, projected income from other units can be used to qualify 
• 6 months' worth of mortgage payments can be rolled into the renovation budget if the house is deemed uninhabitable by the HUD consultant
• Credit scores can go down to 600s (lender dependent) 
• DTI can go to as high as automated underwriting system allows (typically 56.9%)
• Allows you to buy a property in any condition
• Can use it to fix minor repairs all the way up to basically a full tear-down

FHA 203k Disadvantages: 

• Interest rates tend to be about .25-.5 higher than regular FHA loan
• Additional costs include HUD consultant fee, inspections, title updates, and supplemental origination fee (Cost of doing business, but this is built this into your numbers, so it's no big deal)
  Must use a licensed General Contractor for a full 203k or up to 3 specialized contractors on the limited 203k
• Must hold onto the property for 1 year and live in it. 

Hope this helps! Any questions, feel free to reach out.

@JoeMiller @MichaelMinor - The 203k would be a very good solution and while @JohnLeavelle you are correct, he would not be able to do the work himself. I do agree with Michael that if he's creating enough equity, having a contractor to do work is not horrible decision. Also you can do the minimum property requirements and use the 203k and then use the cash that Joe has to do the work outside of the 203k since he has 40-60k to invest with. FHA 203k is a great idea for initial investors starting out and definitely for one who's considering the house hacking method. It really all depends on what renovations are needed and then trying to divide out what fits into the 203 and what can be done by Joe himself. I hope this helps. Good luck in your investing future.

@Sean Richway please add me as well.  Thanks! 

@Account Closed Hi Shelton- glad to hear you are considering a 203k loan.  A great resource for looking for contractors would be www.203kcontractors.com. This site trains contractors to understand how to navigate the program. These contractors go through some serious training and even have to pass a test. HUD does not certify contractors but this is the next best thing. Also other good sites would be HomeAdvisor, Houzz.com and Angie's List. Hope this helps and good luck in your investment!

@Pete Fiannaca - tried to PM you but for some reason it would not go through.  Buzz me.  I am interested 

The 203k is definitely a good option if you're planning to make this your primary residence for at least a year. If not, I would look to go the Hard Money route as suggested by others.