House Hack - FHA 203k - First Property

[Ryan P.]

Hello all,

I have been following BP forums, blogs, & podcasts for the past year & am excited to begin my RE journey. 

I live in Hyde Park (Boston), MA, which is a fairly expensive market. For my first property, I am seeking a distressed, small MF (2-4 units) in my area to House Hack, utilizing a FHA 203k.

According to public record (MassLandRecords.com), the owners of the duplex next door to my current residence have been released from the mortgage, & the property has been taken back by the bank, however, it has not been listed publicly as of yet. My neighbor happened to chat with the appraiser who was out doing the appraisal, & notified him the property appraised at about $190,000. In terms of a potential purchase price, I am not too sure how much a factor that may play, in conjunction with how much was owed on the property. However, the $190,000 value plus rehab, may very well be in my range. I have ran the numbers to a degree using Brandon Turner's Rental/Flip Hybrid Calculator to see the price point where it would be interesting for my goal of at least $200 cash flow/unit (post owner-occupancy requirement), and am hoping to get to the bank before the property goes "public." I am not too sure how willing banks are to work with FHA 203k loans on REOs, however, I'd like to get all my ducks in a row so I can make a legit offer on this property if, and any future properties for that matter.

With that said, I'm not too sure where to start exactly. If anyone has any referrals for an FHA 203k lender, and/or investor-friendly realtors in my area, this newbie would greatly appreciate it! Also, any feedback/guidance on this matter/strategy, or in general, would be more than appreciated as well!

Thank you,

Ryan

[Jaysen Medhurst]

@Ryan P., love your hustle, but I don't think your plan for this property has much chance. There's no upside for the bank to work with you at this point, prior to it going on the market. It would be one thing if you were a cash buyer, but as an FHA buyer...sorry.

Few things to keep in mind:

1) What's the After Repair Value (ARV) of the property once it's been renovated? Personally, I'd want it to be in the $270-300 range, at a minimum. Best case you buy the property like a flip = (ARV*.7) - Repair costs. That give you instant equity once the construction is finished, which gets you out from under PMI. You even be able to refinance and pull out some cash.

2) Be wary of Duplexes, they are very difficult to make cash flow once you no longer owner-occupy. Reason being the expenses are only spread across 2 units as opposed to 3 or 4. It costs about the same to have the grass cut, no matter how many units there are.

Good luck and keep looking. The deals are out there!