203k Renovation in Chicago- Advice/General Contractors

[Joseph Turano]

Hi people,

I'm looking for any and all advice regarding the FHA 203k Loan/ Renovation process for multi-unit properties in Chicago. If anyone has experience (positive or negative) i'd be curious to hear what it was like. I've spoken to a couple people that have done it and it sounds like a fantastic possibility. However, with the labor shortage I'm worried finding contractors could be difficult- does anyone have any referrals? I've done some basic research on GCs in Chicago, here are a few I've come across:

• Cobbelstone
• 4ever Remodeling
• Inland
• 203k Remodel
• 123 Remodeling
• Arete Renovators, Inc.

If anyone has any experience working with one of these companies I'd be very curious to hear how it went.

My understanding is that when doing an FHA 203k loan, you go under contract, have a walk through of the property with a contractor (or multiple to get different quotes) during which you very specifically outline all work that needs to be done with what finishes etc, have a scope of work drawn up, that is provided to the lender, the lender then gives the green light, as construction is underway, there are draws after certain bigger projects finish, an FHA inspector comes through to make sure its done, THAT inspector is who then writes up a check for the contractor after approval is given, this goes on until the work is complete.

This product sounds amazing because you can immediately gain a ton of equity, customize it yourself, have protection via the inspector to ensure things are done properly/up to code, and you can put 3.5% down on the entire thing including construction costs!!

Sounds great but I worry about not finding good contractors that may not have reserves, could drag out work, or walk out on the job. 

This would be a first time purchase, and would likely keep it under 5% down.

Any and all advice would be much appreciated!

[Paul Welden]

@Joseph Turano

I think it's always a good idea to use contractors for the 203k that have verified experience with the 203k or have at least completed a comprehensive education program on the 203k and also have their license, insurance, and financials vetted and verified. 

There are contractors who have earned an accreditation called a and those contractors may be your best option for what you want to do. 

When you get a property under contract where you're doing a 203k, you 1st want to get the HUD FHA 203k Consultant (selected by your lender) out to the property right away. This person does the FHA 203k inspection, determines what's required, takes into account what you want done in addition to the FHA requirements, and develops a scope of work and cost estimate.

Then, after you have that report from the 203k Consultant, you can give that report to contractors for "bidding."

But if you get a contractor with a price lower than the 203k Consultant's price, the 203k Consultant is NOT required to adjust/lower their price.

But if the 203k Consultant is experienced, then the price in their report will be equal to or very close to the contractor price.

There is a pretty good step by step process on how to efficiently do a 203k on the FAQ's at 203kContractors.com. 

Hope this helps!