All Forum Posts by: Stephanie Medellin

Rehab loans like FHA 203(k) and Fannie Mae Homestyle don't require the house to be liveable - you and your contractor would include whatever needs to be done in the scope of work to make it liveable. If it won't be habitable during renovations, you can finance 6 months of payments (principal, interest, tax, and insurance payments) to cover these costs while the home is uninhabitable.

Of course the numbers still have to work, so you have to buy it at a price that makes sense relative to the market and the cost of the renovations.

I'd look at the difference in total rents between 3 larger units and 4 smaller units.  Is the difference big enough to justify all the additional costs?  How long will it take to recoup the cost?  From a tenant's perspective, is the layout with 3 existing units more desirable than chopping the units up and making them smaller?  Maybe the larger units will result in less turnover?

Does it cost more than the 25k in value that you'd be adding to get the architect and add that extra unit? I'd imagine there would be large cost savings by not adding another kitchen, bathroom, or making changes to the layout. The overall loan-to-value ratio matters more than the ARV.

Roofs don't typically add value in the way you would think.  A leaking or very old roof will detract from your value (particularly if it impacts financing), but you aren't going to get a lot of "extra" value from a new roof.  It's simply expected that a roof is in good condition, or has some useful life left.

It's a little concerning that the area is run down and not maintained - that makes me think there may not be a lot of good comps to use.  If your building is the only nice building in the area, it will be harder to appraise because it doesn't sound like there are many similar comps.  Hopefully buildings are selling for close to the 250k you're expecting, even in poorer condition.  It's hard to predict the appraisal value 9 months from now, since a lot of properties may sell before you're ready to refinance, and the comps that exist now may be too old to use at that point.

You can buy properties as an investor and use a conventional renovation loan (single family homes only for investment properties). The renovation loan will order an "as-completed" appraisal - meaning the appraiser will look at your plans for the property and value it as if it was already completed. The lender controls the funds for the renovation, and releases the funds in draws as work is completed. These are 30 year fixed rate loans, so there's no need to refinance when the work is complete, but qualification won't be as simple as a DSCR loan.

I'm having trouble understanding why you would also need a bridge loan to fund the renovation when you've already paid "full price" for the property upfront. Isn't the renovation money built into the ARV purchase price?

 If you already own your own home, have you considered converting that to a rental and buying a new primary residence?    

If you already know your credit score and you're upfront with your financial situation and with what you're trying to accomplish, you should be able to get a general idea of what options are available without another credit pull. 

If you're looking for something specific, it's ok to call around and ask if a lender has that option available.  They will probably ask some questions to determine if it's even the best product for your scenario.  Many times these unique programs may not be the best fit, and there could be something more mainstream that you can qualify for.

No need for any complicated entities to own a property together.  You can have two people on title and only one on the mortgage.  This is very common, totally above board and done through the closing process with lender approval.

@Anissa Allen I'd be happy to help answer any financing questions. There are low down payment options for multi-units when you plan to live in one unit and rent the others, starting at 3.5% down for FHA loans and 5% down for conventional loans. It's a great way to get started in an otherwise expensive market.

@Oliver Martinez  Many lenders will have the option to give a lender credit with a slightly higher interest rate - these credits can help cover your closing costs.  Combine that with a seller credit and you should be able to structure your purchase with only the minimum down payment out-of-pocket.  

To pull this off, you need a good closing cost estimate. You will also need to be pre-approved at an interest rate that has a lender credit.  Then, when writing your purchase offer, you can ask the seller for the remaining amount needed to cover your closing costs.  If you're already under contract, obviously you can't count on getting that seller credit, so make sure you're writing that into your offer.  

Many down payment assistance programs end up being more expensive than taking a slightly higher rate with a lender credit.  

The way around the self-sufficiency test is a conventional loan with 5% down, which doesn't have this requirement. 5% down is for owner occupied properties only (just like FHA). We have conventional renovation loans too.

However, the loan limits for this option will be lower than FHA. Again, these are effective for San Diego County 2025:

• 2-unit property – $1,032,650
• 3-unit property – $1,248,150
• 4-unit property – $1,551,250

This means you could buy a 4-unit property worth $1,632,984 and put 5% down to reach the maximum loan amount of $1,551,250.  

If you buy a property in need of renovations, the cost of renovations being financed must still fit within this maximum loan amount.  The value will be based on the lesser of:

purchase price + renovations   

-OR-

as completed value.  

The appraiser will look at your plans or scope of work, and appraise the property as if the work has been completed.  As always, the comps need to support the higher value, so you can't over-improve for the neighborhood with a renovation loan.

Here's an example:

Buy a $1.2 million dollar 4-plex in need of updating.

Each unit needs $100,000 of renovations, bringing your total to $1.6 million.  Comparable 4-units are selling for $1.7 million, so your value is supported.

You would bring 5% down, using the lower $1.6 million value.  That's $80,000.  Your $1,520,000 loan amount is under the limit.  All other qualification criteria still need to be met (income, credit, etc.)

Hi Mike, welcome to the community! The maximum FHA loan amount for San Diego county is $2,072,250. The numbers you're seeing are for the maximum loan amounts nationwide, which only apply to the highest cost counties. You would think that San Diego county falls into that category, but the loan limits there are just slightly under.

Here are the FHA loan limits for San Diego County in 2025:

SFR 2-Unit 3-Unit 4-Unit

When you're doing a renovation loan like 203(k), the loan limit is the max, inclusive of any renovation costs that you're financing.  If the purchase + renovations are over the limit, you would just bring the rest to closing from your own funds.

Keep in mind for 3-4 units on FHA, the property must meet a self-sufficiency test. This means that 75% of the rental income on all units must cover the monthly principal, interest, property tax, and insurance payment. It can be hard to meet this requirement in some higher cost areas.

I'd be happy to talk further and go over some numbers.  I have several options available for 203(k) loans.