All Forum Posts by: Matthew Porcaro

Sounds like you'd want to use a 203k or homestyle. If you want to do a multifamily, the FHA 203k is more forgiving on requirements for down payment and reserves for multiple units.

The 203k allows you to wrap the renovation costs into the loan, and since it's an FHA loan you can continue to benefit from the 3.5% down minimum.

Especially right now, you're going to be financing the construction costs at a better rate than any private lender would give you!

You can't use FHA without occupying the property. You can keep the other residence, and rent it out. Do you know market rents in you area and will you be able to cash flow it or cover your mortgage + expenses while living in the new place?

Changing your living situation isn't always the most enticing approach, but many investors I know got started this way. Live like nobody else in the beginning of your career, so that at the end of your career you can truly live like nobody else. 

@Keith R Henry

The most classic newbie mistake is thinking they can do all the work themselves or cheap out on a rehab.

Everyone thinks they’re special and that they can somehow figure it out when 99% of others fail at it.

Hire a contractor that’s experienced to do the work.

Use a homestyle or 203k loan to do the renovation on the property. But you need to live there. Live in flips are how a lot of investors got started, including myself.

Down the line when you’re ready to get into your forever home you can move out, rent it out, and purchase a new house.

@Bryan Rodas

If you do a live in flip on the first one to get yourself going, you can use an owner occupant renovation loan like a 203k or a homestyle loan.

These loans allow you to wrap the renovation costs into your mortgage, and you only need to put 3-3.5% down.

Then you can use the equity you build on the rehab for a down payment on another property you can use other loan options like hard money or non-owner occupant renovation loans like the homestyle.

This is exactly how I got started.

@Wyatt Short

FHA 203k, Homestyle, ChoiceRenovation loans are all loans that allow you to wrap the renovation into the purchase.

Keep in mind, all of them require you to occupy the property to be approved.

That said, you get all the benefits of owner occupant loans like low down payments (3.5% of the total purchase + Reno Costs) and low interest rates

@Jonfrey Sanchez

Jeff Onofrio with Mortgage Possible does these loans exclusively.

@Danny Ye

Take it from me, the worst thing you can do in this game is worry about anything other than the next step in front of you. Analysis paralysis kills more people from getting started than anything else in this game.

After I finished my rehab on my 203k I got the reappraisal and refinanced out of the FHA to a conventional mortgage. The rules with refinancing cash out of an FHA are tricky. Plus I think cash out Refis aren't the best bet if you're not using the money immediately. Also if you're renting out the property that's going to heavily eat into your cash flow.

I took a HELOC out after I moved out which I'm retrospect I would have done the heloc while I was living there because you get better rates that way.

@Danny Ye

The FHA is good to get you started but not to repeat. There's plenty of doors that open for you after the first deal.

Stop worrying about things that don't matter. Get this deal under your belt, build equity, get cash flow, get experience, and you'll see how using an FHA every time is not a good idea.

@Cheryl Moore

To this date my first house hack/BRRRR house I ever bought using the 203k was the best purchase I've ever made.

As stated above, as long as you get an experienced 203k lender on your team, and effectively compile a list of 5-7 licensed, insured, and bonded contractors to bid the project, it’s absolutely worth the endeavor.

The reality is you’re putting such a low down payment and the ability to finance all of the renovations, all at record low rates. It’s a win win if you purchase a property at a good price and build in enough equity to be profitable after the rehab.

On my deal, I purchased a deeply distressed 2 family in a rough part of town for $270k. Renovation was $80k which made my 203k loan total $350k.

After the renovation my property was reappraised for $480k, building $130k of equity off of a roughly $10k out of pocket investment.

I also never paid the mortgage after moving in, since my tenants covered my debt service each month.

If you ever have any more questions don’t hesitate to reach out!

MP

@Trent Thompson

The 203k helped me finally get my very first house hack / BRRRR deal under my belt.

I purchased a distressed duplex for $270k, wrapped the $80k rehab cost into the loan making the loan $350k total.

In 6 months after the rehab was complete the house reappraised for $480k, and since then has appreciated to $520k in just 4 years.

In addition, I’ve never paid the mortgage on that since moving in, as my tenants paid it while I lived out the first year. Once I moved out I started cash flowing $2k a month.

The 203k is wildly powerful and as long as you have an experienced team on your side during the process you will be fine.