FHA 203k Program on Duplex then refi

[Alexander Zurn]

I have a property almost under contract (duplex, Newport county, Rhode Island) and I want to be ahead of the game. It needs immediate work and I am considering a 203k loan on the property. Numbers aside (because they would have to work in order for me to go through with it), I am looking for pros/cons of this idea.

My thought is that I can get the property at a lower price, put the work in while financing the repairs, then once it is complete and I have lived in it for a year, rent it out and possibly refinance to get cash out to put towards my next investment.

Is this possible if I am financing the repairs in the loan?

[Anthony Thompson]

I'm not sure I'm reading the question correctly because I can't see any cons.

As long as you can personally afford it since you'll be living in it, which the lender will ensure of course (that you can afford it), I think it's a great way to start out in real estate.

As long as it's habitable (to your standards ;), you'll be able to really "get your hands dirty" with some repairs (even if hiring some out) but without the stress of having a tenant bothering you asking when the repairs are going to be done.

Again, maybe I'm not understanding, but this seems like a great & classic "sweat equity" way to get started. If you're up for the work, it should make a great start.

One minor thing though, I would recommend living in it for TWO years before renting it out due to the fact that you can sell it and keep any profit (up to 250K for a single person or 500K for married) tax-free, as long as you've lived in it for 2 out of the last 5 years.