Missing Something with 203K Loan?

[Brett McManus]

Hi BP!

Having just closed on my first Duplex, I am beginning to start down the track of how I want to tackle deal #2. This first property was purchased with an FHA loan and I am owner occupying one side with the other rented out to a long-term tenant I inherited.
I have been leveraging the current times to research BRRRR but like many other 22 y/o investors just wrapping up their first deal, it might be a bit of time before I accumulate enough funds to comfortably float a hard-money loan. This being said I have started taking a look at utilizing a 203k loan to purchase my next owner-occupied duplex as a way to implement principals of BRRRR (or really just building equity) while maintaining lower out-of-pocket costs.

My question to the group, is there something I am missing with 203k loans that might make them not as appealing to other investors as BRRRR?

I understand PMI would be a piece however, I would think this could eventually be refinanced out assuming you use the 203k funds productively to raise value? In another lens, is it due to the fact that it requires owner occupancy and many investors are not interested in this? Overall, I am still continuing to look into BRRRR but would love to understand if 203k could be another tool in the belt when the right deal comes along.

Thanks!

[Paul Welden]

@Conner Collins The main requirement is FHA loans (203b, 203k, etc.) are for qualified non profits or for owner occupants who intend to reside in the property as their primary residence.

There are 2 types of FHA 203k's each with their own set of unique guidelines. There's a good 203k FAQ at 203kContractors.com. That's also the site I use for my contractors for all the rehab loans my clients do. There's only 1 in Phoenix....so it's makes it really easy. Regardless, that site has a good FAQ section for 203k.