203k loan and refinancing

[Jay Sechowicz]

Hello all,

    Earlier this year I purchased a duplex in Philadelphia and am currently house hacking.  Everything has been going well for the most part, but we are getting tired of living in such close quarters with out tenets quicker than we anticipated.

This brings me to my question. In real estate, a common goal is to use as little of your own money as possible. So, I want to apply some of my investing strategies to my own house which will be my primary residence for the foreseeable future. I want to find a fixer upper and debating on using a FHA 203k loan or not. We could get into the property with out the 20% down and have the renovation costs financed. This is where I need help. I know I need a licensed/insured contractor to do the work. But what is the process like from start to finish? I am not a contractor but I want to do some of the work myself (demo,painting , etc) to cut costs. Is this allowed? If so, do those numbers need to be factored in when contractor gives estimates?

  Also, once all the work is completed I want to refi into a conventional mortgage and get as much money back out of it as possible.  I am not extremely worried about getting all the cash back because it will be my home, not as much of an investment.

  If anyone has any experience with these types of loans I would love to get as much info as possible. Need to pick someones brain the has a full understanding/experience.

Thanks,

Jay

[Christopher Rutherford]

Hi @Jay Sechowicz,

I experienced a similar thing you are thinking about with the 203k. The rule that I heard with the owner doing work is that you cannot be paid for any of it. My contractor placed his bid to do all aspects of the renovation and then I did things like you mentioned, painting, help with clean up, hauled away trash to trim some of the costs. What this did was allow for my contractor to not charge me for this items in his scope of work. I attempted to refi out my improvements but this failed. Appraisal came in at 317k (I owed/had in it about 300k) but managed to sell the house a few months later for 420k so overall it worked out.