New to real estate looking to house hack with FHA / FHA 203k

[Dagem Desta]

Hello BP Baltimore Community, my name is Dagem. I'm 23 yrs old and a recent college grad working full-time. I was always interested in the topic of real estate investing but I never really took any action. Recently, I've been educating myself by reading books, listening to podcasts/audiobooks, etc.. and I'm ready to get started. I'm currently renting in Baltimore City Area, and I'm very interested in house hacking once my lease ends in Jan 2021. 

I'm planning on purchasing a single-family home with at least 3 bedrooms and rent out the other rooms to cover my mortgage expenses, and maybe get a bit of cash flow. I've taken the first step of talking to a lender and I was pre-approved for $220K with 3.5% down, FHA Loan. I've also talked to my lender and was told I can also do an FHA 203k renovation loan. And I'm leaning towards getting a 203k renovation loan because I have time for all the paperwork and work that needs to be done.

I would love to hear your opinion on 

- whether I should do an FHA or Fha 203k

- which neighborhoods I should be looking at?

would also appreciate some recommendation for a realtor that could help me find properties.

Thank You

[Zach Westerfield]

I have looked into the 203K loan but not done one. I have done multiple FHA/VA loans. A few questions

1. Do you have decent credit?

2. Do you plan on completing any/all work yourself or hire a contract?

3. Do you have a resource to get recommendations on good contractors?

The problem with the 203K loan (besides the paperwork) is the timelines. The hold the repair money in a draw account, and will not release it until paperwork is completed and an inspector has been send out to approve the work. On top of that, the contractor may not complete completely in order with the scope of work. for example, maybe a draw was set up when all flooring was done, but he found subfloor issues. A good contractor will continue to work other parts of the project as the delay is handled. However it may take him a while to get 100% of the project finished. He will still expect to get paid, as most contractors have to make payroll weekly. 

That being said, if you go the 203K route you definitely need a reserve of cash on hand so you can pay the contractor when needed, then have the bank reimburse you. I would recommend at least 10-20K depending on the size of the project. 

A better route that I utilize (again depending on credit and size of the project) zero percent credit cards. Many have 0% for 23 months or more. This works if the propperty would qualify for FHA without the rehab. Or i have done a seller escrow account. Me and the seller agreed to increase the purchase price 30K, and he would put 30K in a seller escrow account for repairs. I did an FHA loan this way, and 30K took care of the required repairs to get the loan approved.