South Florida · Member since 2018 · 7 posts · 1 vote
Hi Guys,
I've been reading and watching but I'm not sure if this question has been answered. If you guys have some insight I'd love to hear it! My question is Can I Brrr using FHA 203k financing? I am looking at a property that is 115k Multifamily (under 4 units). It needs about 50k. ARV 180k. Thanks in advanced for your responses!
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
In my market the cost of a general contractor willing to play ball with 203k is such that BRRRR will not work since you will not have sufficient equity after financing the cost of said general contractor.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Jennifer DavisToliver absolutely! You can absolutely use an FHA loan for this purpose as long as you live in the property. That is THE ultimate requirement with FHA loans. You must use that property as your primary residence. Hope this helps but feel free to tag me with any other questions. Thanks!
Real Estate Agent · San Juan, Puerto Rico · Member since 2017 · 72 posts · 44 votes
7y
@Jennifer DavisToliver I believe Brandon Turner has coined this BRRRHouse Hacking (FHA 203k, BRRR method and House Hacking). I'm doing it right now with a big 1960's property that has huge backyard, pool, 7 bedrooms and 4 bathrooms. Plan is to rent out by room in Airbnb since it's located close to beach.
Got the property for $97,750. Financed repairs so loan is $130,000. After repair value is $208,000. I plan on refinancing when the 1 year primary residence requirement is done as @Andrew Postell has said and pulling out the money to finance another deal. I hope to pull out at least $40,000 after covering refinance costs. This is my first deal and using this method has been incredible to jumpstart my real estate investing career.
South Florida · Member since 2018 · 7 posts · 1 vote
7y
Thank you @Roberto Torres I'm in the process of searching for my very first property in the philadelphia market. Inventory is limited so it's been a bit more difficult to find what I want. I appreciate the feedback
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
In my market the cost of a general contractor willing to play ball with 203k is such that BRRRR will not work since you will not have sufficient equity after financing the cost of said general contractor.
It is possible, but, very difficult for the reason @Chris Mason indicated. You must be able to make enough equity gain through the added value from the Rehab to be able to qualify for the Refinance. For multi family properties the typical refinance loan amount will be based on a LTV of 70% to 75% of a new appraisal. That means your equity must grow from 3.5% (your FHA Down payment) to 25% - 30%.
@Roberto Torres is working with a Single Family Residence ( a very large SFR) which he may be able to get 80% LTV. His numbers indicate he has achieved the needed equity gain.
Be sure to find a property that needs a sufficient amount of repair and purchase at a good discount to allow for the needed increase in Value. If you can do that you may be successful. Otherwise, you may have to stay in the property longer than the minimum one year to gain enough equity.
Real Estate Agent · San Juan, Puerto Rico · Member since 2017 · 72 posts · 44 votes
7y
@Jennifer DavisToliver Totally agree with @Chris Mason and @John Leavelle. I had luck because the property I purchased was a distressed fannie mae property listed in HomePath app. It was priced under market and needed 40k repairs approximately. Also, it's located in a hot pocket in San Juan, PR capital. A lot of restaurants are moving in since rents are way cheaper than other touristy parts and beach is walkable distance. That said, this strategy may only work out in certain situations but keep your eye open because it may appear and if u did ur research right, u should capitalize on the opportunity. Good luck!