Adding Value to a House-Hack

[Thomas O'Donnell]

Hello all! I'm currently looking to house-hack in Columbus, OH and was wondering if anyone has had experience doing a value add while using an FHA loan. I know there is a 203k addition to this loan, but I've heard it is difficult to obtain. I really wanted to get a duplex and add some equity to it through a small rehab but it seems very complicated. If I can't get it done, I will most likely be going with a turn-key property as my first. Thanks for any and all input!

[Nick Riccio]

@Thomas O'Donnell I've done major rehabs to my house hacks & I've also helped a lot of my clients do the same.

Few things:

1. I've always used FHA without the 203K component on my own deals. Reason for this is I've always been up against the FHA loan limits, and so I had no room to add the construction to my loan. I also have construction in my family - and now co-own a construction company with my wife. So, we are in this business as well and understand it, so no need to use outside people.

2. I help a lot of clients use FHA and FHA 203K. @Brad Hammond is not wrong, it is a tough loan. In my experience - you need your lender & realtor to be on the same page and support you with this. You will definitely lose on more properties than you win, but it's not impossible. I don't know your market, but in ours, two-unit properties are less desirable for true investors. Couple that with a property that is in very rough shape - and there won't be a ton of demand on it.

Why is that important? If you're going to use a loan like FHA 203K, you won't be the most competitive buyer. So find a property that also isn't very desirable, and make it work.

My personal strategy has been to find two-family homes (again, less desirable), and add significant value. We try to finish basement space when we can, and add beds/baths. This makes our numbers great - but we don't find as much competition which also helps.

Long way of saying feel comfortable sticking with your plan, but you will need to be both patient & creative. Best of luck!