Clarification on FHA 203k loan

[Michael H.]

Hi BiggerPockets members!

I registered to this forum to learn more about real estate investing - specifically in single rehab homes or multi-unit properties.

I am currently living in the DC area. I would love to find a multi-unit home in DC but this is not realistic as home prices are too expensive which defaults me to the Baltimore area where there are several multi-unit properties. I would like to use a FHA 203k loan to rehab the property. I've done my research through this forum and it was unclear to me if you can use the 203k loan to fix up the rental units.

The 203k rules limit the rehab portion of the loan to the unit that will be the owner's primary residence. Is this true? Through this forum, it sounds like people are using the 203k loan to fix up the whole building as oppose to just the unit that the owner will reside in.

[Ned Carey]

Mike Hsu, I grew up off Dale drive between Colesvile and Georgia.

Yes rents are very high relative to the price in the city. If you are doing it right you should always have positive cash flow on a rental - that is the norm.

However it is important to understand that just because rents are more than the mortgage, that doesn't mean you have positive cash flow. Your mortgage should be no more than 50% of your rent or you probably have negative cash flow.

I invest all over the city. My acquisition process brings me deals from allover and I pick the best. Once my monthly expenses are covered by passive income I will start trading up to better grade properties.

Belair Edison has a high number of homeowners although today I think it is mostly a rental neighborhood. It has been hit hard by foreclosures but east of Brehms lane is pretty safe. Right now you should be able to pickup properties for $50K and rent them for $1200 section 8. Those are very good numbers for a rental.