203k Loan but DIY Rehab?

[Noah Barba]

Hey Biggerpockets community, 

I am currently working on figuring out financing options for my first potential rental property purchase. I'm 20 years old and am in college, so money is not something I have much of. For that reason, I'm looking into private money, HUD sponsored financing, etc. I've learned of the 203k loan before, and I know that one of the requirements is that you have a licensed and insured contractor estimate your costs and do the project for you. HOWEVER, I plan on starting off doing most of my rehab work as I have been in the renovations field for a little over two years now. This causes a dilemma, as I am not currently a licensed and insured builder (although I plan to be in the future).

My question then is: since I am friends with multiple licensed and insured contractors through work, should/can I use them as my contractor in the eyes of HUD, all the while doing the work myself? Although this would be a favor, I understand that the paperwork is a burden along with the potential liability that would be tied to my work, so I would make sure to pay my "contractor" for doing this for me. After all, they would be providing me a service.

Is this a potential mess and bad idea? Or could this be an efficient use of creative financing/thinking? Thanks for reading and anyone who can help me understand!

P.S. I am looking for a duplex, so this will be owner-occupied

[Bryan Devitt]

203k and "efficient" don't go in the same sentence. They are very time consuming, drawn out and overly complicated. Yes it will work, you just essentially work for the contractor as a subcontractor. I doubt it is allowed, but I also doubt you will get caught. With that said, I cannot say how much of a poop show these loans are and it takes 2-3 times longer to do a reno with them due to the draw requirements and how little money they give you at every stage. You have to be very strategic with ordering materials and comparing it to your draw schedule so you don't run out of money or get stuck with a dead spot that could last weeks. When you take into consideration how much rent money you will be losing, you should just use hard money or figure out another way that will be cheaper in the long run