New From Chicago - FHA 203k for first deal?

Question

Greetings all!  My name is Lisa and I currently live in the West Loop area of Chicago and work as an interior designer.  My boyfriend and I are in the stage of gathering information and formulating a plan to begin flipping in our spare time which will hopefully snowball into a full time gig.  He's the numbers guy and I have experience with construction and aesthetics so we will make a good team.  We are thinking of rolling buying our first home in with our first "deal" as a somewhat safe way to get our feet wet.  We are thinking of going the FHA 203k route in one of the nicer areas west of the city (Oak Park, Elmwood Park, Riverside, etc) so that we can take advantage of the lower down payment, rehab loan, etc.  After living there for a year or so, if we goofed up and can't sell it, then at least we have a place to live!  Has anyone else done this or thought about it?  We know it makes for a slow start, but we don't have the traditional 20% down nor the reserves to take on reno.  Ideally, this deal will work out in our favor and we can start financing much quicker deals.  Also, if anyone has a recommendation for someone they have worked with on getting a 203k (we are thinking streamline at this point) loan, please send me a message.

Lisa Maceda · Answer

@Ben Wilson We did go ahead and use a 203k loan for our first 'deal'. We bought just about the cheapest house we could stomach in Oak Park that wasn't threatening the fall over in a gust of wind and turned it into the best house on the block. It was an extremely enlightening process. Our lender was fantastic and really helped everything move quickly. We probably would have closed in 30 days had we not gone back and forth with the owners trying to negotiate the price. We learned so much and having the security of the loan helped some hiccups along the way not turn into disasters. We had a lot of help…a lot. My boss is an architect and he signed the drawings I stayed up all night fretting over so that we didn't need to pay an architect or engineer, my parents let us stay with them when the construction schedule flew out the window, and our HUD consultant was always a phone call away when we had a question. I think we were lucky in some ways and unlucky in others, but in the end, our house is so amazing we almost want to just keep it….but what's the fun in that? We are getting the itch again.

Here is a quick Before and After

Tim G. · Answer

I think its a great way to get started.

When you are new, you are have time you have credit (hopefully) and you are willing to put work in. So, why not use someone else's money (which the newbies usually don't have a lot of) to get things rolling.

I'm on my second rehab loan right now, my fourplex is nearly done and a second investment house is utilizing a similar loan but with 20% down this time.

I say go for it. One thing to really consider is avoid a non-streamlined 203K at ALL COSTS. Make sure your lender really specializes in these loans as they are known to go ass up in escrow all the time and that scares sellers from even accepting those offers.

Be on top of your game, move lightening fast when they ask you for anything and make sure you have a solid contractor who is tech savvy and can handle all of the paperwork requests.

Let me know if you need any advice I'm knee deep in it as you can tell :)

Lumi Ispas · Answer

@Lisa Maceda welcome to BP. Great pictures and great job! Have you already found a great person, if not I have the best out there! It's actually the person that oversees all Guaranteed Rate 203K all over the country!

Andy Peck · Answer

Hey @Lisa Maceda, thank you for sharing! I am currently starting a process on a 3 flat in Logan Square. Do you mind sharing who your FHA Consultant was?

Funny, thing is we are also living in the West Loop of Chicago and making this our first project to get started.

Thanks!

Dave Visaya · Answer

Hey @Lisa Maceda welcome to BiggerPockets! It's awesome to have you here!

Michael R. · Answer

Lisa,

Congratulations on this amazing renovation!  Your story has encouraged me to take a similar approach in the Chicago land area.  Could you, by chance, send me a private note with your lender info?  Any advice would also be greatly appreciated! :)

Brandon Turner · Answer

Hey @Lisa Maceda welcome to the site! It's great to have you!

Timothy Riley · Answer

Welcome to BP...

James Wise · Answer

@Lisa Maceda

Welcome to the site.

Ben Wilson · Answer

@Lisa Maceda Over a year later, did you end up going the 203K route?  My wife and I are considering this option in the Chicago area as well, and I'd be interested to hear about your experience.

New From Chicago - FHA 203k for first deal?

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