I’m considering doing a 203k in Texas

[Thomas Delacruz]

Hello bigger pockets! All of you are awesome and I’m so happy to be here!

I’m looking for advice on my first investment and I think going down the 203k route is up my avenue.

I’m a licensed electrician in Austin, TX and have been an apprentice carpenter as well, so very handy around the house. Sweat equity is probably going to benefit me the most being this is my first.

Just looking for a little guidance on this topic, and hopefully to connect with you all a little more.

Also looking for a mentor and can make it worthwhile, Lets work together!!

[Paul Welden]

Sweat equity (called "self help") is allowed on the 203k, according to HUD guidelines.

But lenders have overlays (additional rules/restrictions) and most (maybe all now) lenders will not allow sweat equity (self help). It's too risky for the lender to allow the borrower to do their own work for many reasons:

1. borrower does not get paid for the work
2. if borrower gets hired to do another project, the borrower may place the 203k work on hold
3. putting 203k work on hold for too long can violate FHA 203k timelines/deadlines
4. etc., etc., etc. 

In a self-help 203k, borrower must add in to the loan the cost that a contractor would normally charge for the project, just in case the borrower cannot complete the project. So, there would be enough money to hire an outside contractor to do it. 

There are a lot more nuances to a self help 203k. So, just sent me a DM.

Reference HUD SFH 4000.1.

@Jordan Moorhead lenders should not be referring specific GC's to borrowers as that can violate HUD's guidelines regarding the "Identity of Interest / Conflict of Interest" statement that is associated with 203k's. Also, lender referrals of GC's creates too much liability for the lender. In fact a GC and a 203k Consultant in NY were recently indicted by the NY attorney general for fraud and the lender is also on the hook for the referral!

It's best for the borrower to locate their own contractor, preferably one that has the accreditation as a Certified 203k Contractor - 203kContractors.com. That's where I go for all my rehab loan needs.