203k loan rental property

[Jerry Booker]

Hey, I’m looking to buy my first rental property in Chicago where I live now.. Is there anyone who has done the 203k loan in Chicago? If so could you please reach out to me with the lenders who are familiar with the 203k loan and also any advice about the process or rental properties in general..  

Thanks, much appreciated 

[Paul Welden]

@Jerry Booker

HUD has 2 online databases of lenders who have 203k experience.... HUD FHA Lender List and the 203k Endorsement Summary Report. If you want help using them, let me know. 

In Chicagoland, there are 12 lenders with physical offices near you that have done at least 1 FHA 203k in the past 12 months and an additional 37 lenders that may not have offices nearby but have done at least 1 FHA 203k since October 2021.

I don't think you need to know your ARV in advance, but rather a general idea of the ARV range, which can be easy for any REALTOR to tell you by looking at comps. You certainly do not want to over-improve for the area, but in this market where property values are increasing at a fast pace, there may not be many issues with an appraisal. Also, FHA 203k Loans allow you to exceed the improved appraised value by 10% and still close the loan.

@John Warren is absolutely correct regarding the contractor who needs to be well capitalized. There are contractors who have the accreditation as a Certified 203k Contractor, which is obtained after completing a 203k education course and a strict vetting process, including verification of the contractor's financials. In addition, @John Warren is also correct that you need a very good team to do a 203k, which consists of a 203k-experienced lender and a . 

Hope this helps!