Fha 203k to gain equity

[Arthur Clark]

I will make my first property purchase this year. Due to potential comp issues I am reevaluating a multi-families as my first property choice. I am considering a Fha 203k on a distressed to create equity for additional investments. Is this a good, bad or risky idea? Thoughts and or experiences would be greatly appreciated.

[Shannon K.]

One current flip I have is an FHA203K... It is a live-in flip as I am occupying the property for the required time period. There are a ton of rules, regulations, and paperwork... I had a rather horrific experience with the bank during this entire process, but I made an amazing buy and am currently rehabbing it to my liking. I will be in the neighborhood of $80-100k in equity/profit when complete. Overall, a great idea and I'm very happy to be in this house and working on this project!

Major downsizes:  203k loans are expensive!  I had to come out of pocket $17k on a $94k loan for closing costs & fees. Not a happy experience there since I was originally quoted $12k to close this deal and it changed overnight.

Additionally:  The bank required repairs which I could have easily performed myself: Installing new windows, paint the chipped paint on the stairs, repair side porch deck, demolish shed. These things were required of me and I could have easily done them, but was not allowed. I had to pay a bank-approved contractor with the loan monies to complete them.

I am happy with my decision to use the 203K loan on this one. It is a good strategy if you can roll with the bank's requirements :)