203(k) vs Hard Money

[Chris Allen]

Hey all, I just wanted to see what others recommend when starting out. I know that there are advantages to a 203(k) loan, including lower interest compared to hard money, and certain protections when it comes to refinancing to the borrower. I found a REO property that needs a lot of renovation, including foundation. I am pretty handy and have friends that can and want to help me with a rehab to gain experience, so I planed to save some money by doing some work on my own while living in it to save some money on hiring a contractor. If I use the 203(k) loan I can't do my own work on the money that I borrow but will have to use my own money to do my own work. What do yall think would be the best route to use for a newbie? Maybe use the 203(k) on my first property that I will live in then utilize hard money on others that I won't live in?

Sorry if this question is kinda all over the place and does not make a lot of sense. Any advice would be great!

[Chris Mason]

Originally posted by @Victor S.:

Originally posted by @Matt K.:

203k might make it harder to get your offer accepted by the seller...

 yeah, since it's fha... instead, look into fannie mae homestyle loan.  available for investment properties as well. however, not many lenders are well-versed in these, so you'll have to network and find the right one. @Chris Mason could probably guide you in the right direction.

 203k v HomeStyle are ballpark equal in terms of "how much of a pain in the *** is it to get one."

Really it comes down to where the dial is turned for the seller between time and money. 

A HML-backed offer should be lowball, but fast. So a time-motivated seller takes the HML-backed offer.

A reno mortgage-backed offer should be on the higher end, but it will be slower to close. So a $$$-motivated seller takes the reno mortgage-backed offer.

PROTIP: Make two offers. $250k with reno mortgage, $200k with HML. Now, instead of the seller shopping you against multiple other buyers, they are shopping your multiple offers against THEIR priorities.