Possible to 203k loan a House Hack ?

Question

I have not found alot of info on this , but I am interested in possibly buying my first rental property using an FHA, but I was wondering if it is possible to get a 203k loan to finance the rehab at the same time? Thank you

Anthony Angotti · Answer

@Andrew G Martinez it is, but is usually pretty involved. Everyone else gave you the right information,My only additional advice is to investigate some other loan options as well. There are some other programs out there that are not 203k, but still provide renovation money. For instance if you do a single family house hack there's the homestyle loan. https://www.fanniemae.com/singlefamily/homestyle-renovationA mortgage broker or agent in your area can probably help get you info on someone who can provide you with some other types of loans. 203k is probably the most involved loan product for residential that I know of with the most tedious process. It's a good option, but is definitely more involved than most residential loans.

Steven McCutcheon · Answer

@Andrew G MartinezDepends on the lender, but definitely possible. Banks will most likely will need a General Contractor to get involved with the repairs on some things, and make sure your numbers work. Otherwise, good luck! Best,Steve

Chris Isley · Answer

Check with your lender, but mine required 1 estimate from a general contractor that would be responsible for completing the entire project. Also, the GC will need to be comfortable with progress invoicing, so they would be getting paid in installments as the work is completed, my lender does not provide any funds up front for a deposit so the GC needed to be able to provide L&M for the beginning of the project prior to the first payment.

Dan Weber · Answer

Hey @Andrew G Martinez, it certainly is possible. I did this when I bought my first duplex in 2017. They will appraise the house based on what they project the ARV to be once the renovations are completed and brought up to FHA standards. One thing to be aware of is that there is much more paperwork with a 203k loan. You will need to hire a licensed contractor for the work and the contractor will need to put together a detailed scope of work with line items and prices. Some contractors find this tedious so just make sure you set their expectations (paperwork wise) before you hire them.Also, when I went through my rehab, the bank cut me a check for the first half of the 203k budget up front at closing and then didn’t provide the second half of the 203k check until after the renovations were complete and they had an appraiser come out and verify that all the work on the original scope was complete. With this being said, just make sure you have enough personal funds to float part of the rehab if the bank decides to not provide you the second and/or third budget payments until after the work is complete – because your contractors want to get paid.

Alexander Flores · Answer

I did a 203k loan for a live and flip. Wanted to do an FHA but the appraiser said the bilco doors needed to be repainted, about 15 ft of baseboard was missing the covers, and a shutoff valve was leaking. They forced me to turn the loan into a 203k.You just have to make sure the numbers work for the property. Also, some repairs must be done by a licensed contractor so something that might cost you a couple bucks needs to be done by a professional. We ran into this problem, the repairs would have cost about $150 bucks and a few hours of my time but ended up costing us $500 to pay a contractor to complete.

John Errico · Answer

@Andrew G Martinez there's a fairly sizeable group of northern NJ-based investors here on BP, many of whom invest in the surrounding areas (myself included). There are also a bunch of meetups posted on BP happening monthly in the area. I, myself, have house-hacked with an FHA loan (though not 203k) in Union City, and had a lot of success with it, and have many friends that have done the same (including with 203k loans). I think there are still opportunities to do so in Bayonne, or somewhat further west, and possibly even in some areas of Jersey City, depending on your tolerance for living in slightly less desirable areas.If you'd ever like to chat about northern-NJ specific markets, definitely let me know--as I mentioned, there are a bunch of us on BP who are happy to give advice and thoughts about specific areas. Investing in northern NJ is, in my opinion, great, but definitely requires city-by-city and, frequently, block-by-block knowledge of these areas to fully understand the area.Best of luck!

Alexander Flores · Answer

You're welcome if you're ever interested down here in Ocean County let me know!

Andrew G Martinez · Answer

@Steven McCutcheon @Anthony Angottiappreciate the advice, also will look into homestyle loan at some point, for my area it seems that all the deals I analyze are showing that single family homes in North Jersey may be a tough bet for my first investment. I do have plans to move out of my current market in a few years to Florida or Georgia to continue my journey, at which point the homestyle loan can definitely fall into my plan..@Alexander FloresThanks for the insight, if you ever are looking into investing in the North Jersey area and need any info I'd be glad to help, I grew up in Jersey City and have great area knowledge of my surrounding cities and towns.Thank you all for the responses

Alexander Flores · Answer

I was initially going to flip the home but when I saw the amount of equity in the deal I decided to live in the property for over 2 years so that I would not pay as many taxes as if I just flipped the home. I had roommates the entire time so they helped with the holding costs over the period. I currently have the property listed on the market.I live in and invest in Ocean County. It is a decent area but just all single-family homes unless you want to get into the shore rentals which are pricey. Taxes here are cheaper than up near you but still expensive. The only problem with Ocean County is you go west of the parkway and it is all state lands so there is a small area for homes and investing.

Andrew G Martinez · Answer

@Alexander Flores Curious to learn more about your live in flip, I assume a single family, and sold after satisfying the 1 year occupancy term ? Also see you are from South Jersey, what are your thoughts on investing in that and surrounding areas? I live in Bayonne border line Jersey City where it is extremely expensive (and taxes are through the roof). I have looked into areas like Carteret as well as Cliffwood and Keyport. Thanks for your feedback and providing a rookie some guidance!