FHA 203k Renovation loan success ?

Question

Has anyone on here have any success using a 203k Renovation loan in the Southern California Market... to start real estate investing afterwards??

Paul Welden · Answer

I am well versed with the FHA 203k Rehab Loan for all areas of the country because of my role as the Director for the National 203k Contractor Certification Program.

The 203k is not at all complicated when you have the appropriate people helping you, such as:1- a lender with verified 203k experience

2 - a 203k consultant with verified experience

3 - a Certified 203k Contractor

Using the most appropriate partners, these 203k's get completed without many (or any)  complications. However, you are only as strong as your weakest link. So, select your partners wisely.

Jeremy Corporan · Answer

@Paul Welden

I noticed you mentioned Newark NJ in regards to 203k activity in that area. My question is how well do you know the market over in NJ. I see that you are in Arizona but mentioned Newark NJ so i am intrigued by your answer. Im interested in getting started into real estate investing using this method. Ive done some research extensive research but the more i look into it the more complicated it seems to closing this type of loan.

Jeremy Corporan · Answer

@Paul Welden

I noticed you mentioned Newark NJ in regards to 203k activity in that area. My question is how well do you know the market over in NJ. I see that you are in Arizona but mentioned Newark NJ so i am intrigued by your answer. Im interested in getting started into real estate investing using this method. Ive done some research extensive research but the more i look into it the more complicated it seems to closing this type of loan.

Paul Welden · Answer

@Simon Ruiz There could be many possible reasons that there is little 203k activity in SoCal. It's certainly NOT the lenders because there are thousands of FHA approved lenders in that area that have boat loads of cash for FHA loans.

But it could be the real estate market. Typically in a seller's market, rehab loans become less popular.

It could be the FHA maximum loan limit, but that can be as high as $1.4Million for a 4-plex.

It could be the lack of available contractors who have been properly educated on the 203k. Sure, there are contractors who will try to wing it but they don't make good, reliable partners for the lenders and REALTORS.

The rehab properties exist; the lenders with boat loads of cash are available, but maybe the missing piece are the contractors properly educated on the 203k. And maybe the market, especially if it's a seller's market.

Most contractors don't even know how to introduce the 203k or other rehab loans an existing homeowner who can't afford the remodel they want.

Simon Ruiz · Answer

@Paul Welden why do you think this is? If there is only 7 happening in SoCal a month this makes me think there not really worth doing or the houses back east are old enough to justify the numbers..

Paul Welden · Answer

So, there are people doing 203k's but not as many compared to cities like Newark, NJ or Chicago.

Paul Welden · Answer

Last month, there were 8 FHA 203k Loans that were endorsed and 82 last fiscal year. So, there's an average of 7 FHA 203k Loan projects available every month in SoCal.

Simon Ruiz · Answer

@Chris Mason Yea I do agree with you on the trades thing... I already keep business cards of people that I meet in the industry... But the truth is I don't go out of my way to meet the roofer or tile the guy.... they certainly can be useful to me or anyone I know in the future.. Ill have to spend some time with them during new construction jobs...

Chris Mason · Answer

Yup; the overwhelming pattern that I've seen is that certain folks have experience that gives them a leg up and makes it viable. People in marketing, sales, general contractors (trades in general), and Realtors. You either need to get the house dirt cheap (marketing, sales, Realtors), or you need the rehab budget done dirt cheap (GCs and folks in the trades).

Given current supply/demand imbalance for general contractors, by 'default' you will not be getting that for cheap. And if it's on the MLS, you aren't by 'default' getting the house dirt cheap either. So something's gotta give. If you're paying top dollar for all of this, your FHA 203k loan application will be denied at the last minute when the appraiser says that the house is going to be underwater by the time all the work is done, having purchased the property at X price and the work costing another Y.

My $0.02 specific to you:

I see that you work in the a/c industry. That's your angle that will make it work. As part of your day-job, you presumably encounter folks who have non-a/c needs... Joe inherited the house from his mom and is getting a bunch of work done - including the a/c - to get it ready to be sold. You notice that the property also needs a new roof. Fortunately you know a great roof gal, Jessica (note: do make sure that Jessica is actually good at her job). Boom, referral. And again, and again. Jessica is going to start to like you before long, and that'll come in handy when you try to 203k a property in SoCal that needs a new roof (it'll also help that in the meantime, Jessica starts sending you business). Get that referral network going ASAP, if you don't already have it going. As someone in the trades, you already know that anyone with an IQ over potato gives ZERO cares about promises of future referrals, but you also know that past actual referrals means the world.

FHA 203k Renovation loan success ?

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