What next after 203k house hack?

Question

We've closed on our 203k multi-family house hack on Chicago's north side and are going through the motions of construction now. I have 6 units total and I want to get to 15 by the end of 2017... so 9 more. Big question is: Now what?

My previous goal was to leverage as much as possible to score something as big as possible and have achieved that with this current house hack. Chicago is a big market. Because of that and the goal I just achieved, there's not enough left over after this recent acquisition to do much of anything here and I would rather not look at another market (I am in metro-Detroit and Chicago proper already).

Shifting gears certainly is the only way forward at this point, no?

What sage advice is there at this point for a cash strapped investor with an 8a-6p job + a family? Find deals? Find JV partners? Find a mentor?

Eric La Pratt · Answer

Isaac - Everyone is in a different place financially. If you have a large amount of cash reserves with great income and a risk tolerance, then they may be right. However if your agent and your lender are discouraging 203k *only* because they take longer and are more complicated, I suggest immediately finding a new agent and lender. Hands down, no questions asked, just walk away.

I would never have done what we've recently done any other way, unequivocally. My agent and lender were nothing short of extraordinary. PM me and I'll send you their info if you are interested. Yes, it is more complicated. Yes they take longer to close. But as a new investor, this is all a major benefit to you. Doing a 203k with a solid team is like training wheels that prevent you from tipping the bike over no matter how hard you try. You learn TONS more, you are forced to dive deep into analysis during the scope of work process and you take more time to make an intelligent decision. There is another 5% down non FHA financing that is worth considering, too, but I did not go that route.

Also I was able to get 3% back on the purchase price at closing while only putting 3.5% down. Do the math and you could consider that as getting a building in Lincoln Square for .5% down for the property + 3.5% down on the rehab price. For me and my situation, it was a no brainer.

Jo Ross · Answer

@Eric La Pratt

@Eric La Pratt  The  project is out of state, that is why this is an issue.  Yes, you are correct. I have a six month timeline to complete my project.  Everything else is in order except the city ( Chicago) has changed a few laws effective this year and Zoning has to sign off on my dormer. I have emailed my contact at the bank and will keep you posted on their response. I had a 203k stream line in 2013  ( under $35,000) in repair cost and that only required the normal permit process and I served as my own PM. No issues... Again, I will post the bank's response as soon as possible. Thank you.

Eric La Pratt · Answer

@Jo Ross That is a great question! My contractor is working on multiple projects, not just one. What is the timeline that your lender gave you to complete the project? Six months I am guessing?  It would be worth having a couple of contractors walk-through just to price it out.  Should have the blank BOR to give to GC's, right? I'm not familiar with changing contractors midstream in a 203K but would be very interested in knowing!

Jo Ross · Answer

Hello everyone:   I recently closed on my 203k ( Homestyle loan) and it took a bit longer than my previous conventional loan.  However, the team I worked with were on the ball during then entire process.  My concern is because my  loan took longer than anticipated, my contractor has a job lined up now and I will now have to wait for him to complete this job. Just wondering if I can switch contractors or should I wait for my contractor to complete the job? And yes, I am living in the home during construction.

Fe Kelly · Answer

@Eric La Pratt that's makes sense. So can I live in the property while I rehab it of it's a sfh? I want my first rehab to be a multi-family house hack, but multi-family units are very difficult to find in my area. I'm willing to go with a traditional single family just to get started if I have to.

Fe Kelly · Answer

I've learned so much from this post. Are the 203 loans only for multi family properties or single family as well?

Caleb Brown · Answer

@Isaac Plumb I was working with a lender who told me no rehab loans...so I went and found a guy in my area who specializes in them. Not only do you want to find a lender who knows the rehab loan process...but you want to find an agent and CONTRACTORS who know who know the process. Yes it is much more paperwork for the lender, so you need to find someone who is familiar with it and wants to do business that way with you. I agree with what others are saying...if rehab loans are the best option for you (like they were for me) and your lender/agent is encouraging you not to go that way because its more difficult for them (which it is)...then walk and find a team that is familiar with the rehab/203k process.

Andy Peck · Answer

@Isaac Plumb, @Eric La Pratt hit the nail on the head, that "advice" you are getting from your agent and lender has their best interest involved and not yours. Speeding up the process serves the bank and the agent, and there's nothing wrong with either of those things happening, it's part of the business, but to discourage you because of the time element? No thanks..

I'm in the middle of a 203k house hack right now and yes it takes longer and you will have many headaches along the way but if you don't go with the 203k process, make sure it is because you do not want to, not because your agent and bank want to do a different loan to close faster.

What next after 203k house hack?

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