Creative ways to use FHA financing on wholesale deal?

[Meera Lakhavani]

Hi BP Friends!

I am searching high and low for a multifamily property on the north west side of Chicago that cash flows -- no easy task! A lot of what is on the MLS is overpriced from a cashflow perspective and when I find a rare gem there are numerous above asking price cash offers that overtake mine.

I have expanded my search to include wholesale opportunities and found something fabulous in Logan Square that requires a gut rehab. However, as I expected with wholesales, it says "Cash or private/ hard money only".

I was ideally trying to do an FHA 203k renovation. I am wondering if it is possible for me to finance the initial deal with hard money then immediately buy it from myself using FHA 203k. Does anyone have experience or ideas surrounding this?

The price is 310k and ARV is 580k. Another thought was to finance everything with hard money then when the renovation is complete I can appraise and refinance conventionally with 30% equity. However the interest payment (assuming 12% annual interest on hard money loan of 410k) alone would be $4100 per month during the construction months. This would be a lot to eat in addition to my living expenses because i only take home 5k after taxes monthly from my W2 job.

Let me know what you think! Any ideas or wisdom would be much appreciated.