Adding a unit with 203k loan...

[Dan Taylor]

I'm pretty well versed with the 203k loan and the intricacies of how tedious the process can be. However, I couldn't help but asking:

"Has anyone ever used the 203k loan to add a unit(s) to an existing structure?"

According to the 203k program, it is allowable (up to 4 units) as long as the property, as with any FHA & 203k, is Owner occupied and (at least) a portion of the existing foundation is used.

We currently have an opportunity to add a unit to a duplex that has been completely gutted. The location is key for us and all zoning requirements have been met. Now, it's just a matter of finding the additional funding above and beyond the original renovation estimates. The 203k loan would work well without having to seek hard money or private money.

FHA says it's possible, as long as the LENDER is ok with it. I've been in contact with 3 203k lenders in my state who have all agreed to originate the loan - but only if/when they find a 3rd party/investor to sell the loan to. Been waiting a few weeks now and still no return calls.

So again, although it is technically possible, is it realistic? I have yet to find ONE instance where a 203k was used for adding additional units.

Thoughts?!

P.S. Before you ask, YES, I'd be moving into one of the units, and YES, we've run the numbers and even with the addition the ARV is below market value and comps. We got the house dirt cheap.

Also, if you've ever added a unit, with or without the 203k loan, i"m interested to hear how it went and if you think it was worth the hassle.