Using the FHA 203(k) Loan as an Investment

[Adam Edmondson]

Does anybody have any advice on using the FHA 203(k) loan? I am currently renting, but looking to buy soon; and I have an Idea that is similar to a BRRRR strategy. I'm brand new to the investing world and would like any advice on whether this seems feasible or not.

My idea is to purchase a distressed property, using an FHA 203(k) loan. This loan will finance the value plus repair costs, or up to 110% of current value, whichever is lower (so it seems the 110% figure is the cap). I have read that you can refinance the FHA loan into a conventional after 6 months. So, with the right deal the ARV should be higher than what I have in the property, and I could either refinance or take out a HELOC for a profit. Then, reinvest that capital into a fix and flip. (I would like to do fix and flips first, then get into rentals, BRRRRs, etc. later on.)

Of course, all this will only work with the right deal to begin with, but I'm wondering if I'm missing something; and whether something like this would work at all.