FHA 203K Loans

[Anthony David Quinn]

Hi BP. New investor here. 

I currently own a primary residence with about 170K in equity. I’m looking at purchasing a new property as a primary residence, renting out my current home and with a view to renting out the new property after 12 months. I’m unsure of the best strategy. I have three potential options (I think). 

1- FHA 203K Loan.
Buy a distressed property and use the 203K loan to rehab. After 12 months rent out. 

2- Buy a more turnkey property with a conventional loan 5% down. (Worry is that nothing cash flows with rates so high and only 5% down). 

3-Conventional loan on a fixer upper, take a HELOC (approx 120K) on my current property before we rent out and use that to rehab.

I’m hoping someone with experience can help guide me. 

Thanks so much! 
Anthony 

[Chris Merchant]

I do not have much experience with the 203k, I did however read about it in a book by Brandon Turner (the no money down book) and I can say if I was going to house hack or do your plan of buy live for 12 months while doing a live in rehab I would certainly use the 203k loan if I needed any sort of conventional financing as long as I and the property meet the requirements for the loan.  The USDA also offers similar loans (for more rural locations with stricter location restrictions) but they offer 1 that you do not even need to live in for the year, it is strictly for rural investment properties, but it offers the same benefits as the 203k as far being able to roll rehab costs into the loan.  

Again I have not used either of these loans myself but did read about them in Brandon's book and was rather intrigued about the different loans out there through conventional lending institutions.