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203k loan in San Diego?
Has anyone tried using a 203k loan in San Diego? I'm looking to buy my first property with 3.5% down and I want to force that appreciation by renovating it and tying that renovation cost into the loan I get.
Has anyone done this with a 203k loan in San Diego? And if so, any advice or recommendations? Thanks!
I'm not sure about San Diego specifically but I see no reason why it wouldn't work at the moment. Sellers are finally being forced to consider different financing options, lower prices, closing cost credits etc, which they haven't had to do for the past 2-3 years. Now is a great time to go for the 203K loan! Also from what I have experienced in my area, contractors are getting a little less demand than they had been before too, so now are more open to through 203K loans which can be a bit tricky to navigate. I'd say go for it!
-
Real Estate Agent New Hampshire (#075051) and Massachusetts (#9567686)
- (978) 396-9939
- https://christianehlers17.com/
- [email protected]
Quote from @Mary Ainsworth:
Has anyone tried using a 203k loan in San Diego? I'm looking to buy my first property with 3.5% down and I want to force that appreciation by renovating it and tying that renovation cost into the loan I get.
Has anyone done this with a 203k loan in San Diego? And if so, any advice or recommendations? Thanks!
Hey Mary, my first purchase ever. It was a fourplex in San Diego with a 203k loan... this was in 2013 though. $325k purchase, $15k down, $30K in renovation money (cosmetic fixer, two units trashed, one not great, one ok) + $10k extra of my own funds to do some extras. It was a great experience. A decade later still the best move I ever made, it's a cash machine, and that $15k has had the best return on any investment I've ever made. But... I get times are different.
Feel free to PM me, the market has shifted and prices are coming down. Investors & Speculators aren't buying as much so it allows the opportunity for folks to try and do deals like this again. But it does mean you need to be careful, lenders and realtors aren't quick to admit the new risks of a falling market as they need to earn a paycheck. This doesn't mean don't buy, but you must buy smart and be ready for all outcomes.
You're going to want to build a team. You MUST use a contractor who has their $#@% together and you do not want to do anything but a STREAMLINED 203k this means only cosmetic repairs (no structural) and usually at or around 10% of the purchase price in repairs. The non-streamlined is not easy and can be a real pain. I've done the 203k and a conventional version. But both were a decade ago, both turned out well with some bumps along the way. Also, keep in mind the property MUST appraise for more than what you buy it + the repair funds they provide you.
The big thing is obviously finding the deal, and the seller willing to take your more complicated offer. The multi-unit play is tough here but if you can pull it off long-term it could work. Mortgage rates are nuts right now so making sure it pencils might be a challenge. I love this loan it requires really being on top of your game and finding a deal where you can add value and solve problems. I got my deal because I'd buy it with heroin dealers in one unit, the cash investors in 2013 wouldn't take that risk. It paid off for me, that was my advantage. It takes these types of moves sometimes.
I hope this info is helpful, I wanted to share as much here in case other folks needed this info too. I get this was nearly a decade ago so some things have changed, and others haven't.
#3 House Hacking Contributor
- Real Estate Agent
- Los Angeles, CA
I did it in Los Angeles. It's doable but you have to get creative and have a flexible contractor who understands how they get paid. It isn't as easy as cutting a check whenever you want. There is a process between the HUD Consultant and the lender. With all of that said, I wouldn't have done it any other way.
@Mary Ainsworth I just closed on a house hack in northpark! It has a garage that is permitted to be built into an ADU and I plan on doing so! Here to answer any questions.
Quote from @Christian Ehlers:
I'm not sure about San Diego specifically but I see no reason why it wouldn't work at the moment. Sellers are finally being forced to consider different financing options, lower prices, closing cost credits etc, which they haven't had to do for the past 2-3 years. Now is a great time to go for the 203K loan! Also from what I have experienced in my area, contractors are getting a little less demand than they had been before too, so now are more open to through 203K loans which can be a bit tricky to navigate. I'd say go for it!
Thanks Christian! Appreciate the insight, I didn't think about how it could affect contractors too which makes me even more motivated to try that route :)
Quote from @Rick Albert:
I did it in Los Angeles. It's doable but you have to get creative and have a flexible contractor who understands how they get paid. It isn't as easy as cutting a check whenever you want. There is a process between the HUD Consultant and the lender. With all of that said, I wouldn't have done it any other way.
Thanks for the insight! Glad to hear it worked even in a more expensive area than San Diego :)
Quote from @Tim G.:Wow thanks so much for the insight! Really good to know it worked for you in San Diego, I'll look into some areas that are maybe a little more questionable to hopefully find a deal that works better (still working on nlyzing deals). One follow up question - I read that you could still do a Full 203k (instead of streamlined) and still just do cosmetic repairs on the property,, I would just have a higher amount I take out for a loan. Are you saying Full 203k requires that there is also strucutral repairs?
Quote from @Mary Ainsworth:
Has anyone tried using a 203k loan in San Diego? I'm looking to buy my first property with 3.5% down and I want to force that appreciation by renovating it and tying that renovation cost into the loan I get.
Has anyone done this with a 203k loan in San Diego? And if so, any advice or recommendations? Thanks!
Hey Mary, my first purchase ever. It was a fourplex in San Diego with a 203k loan... this was in 2013 though. $325k purchase, $15k down, $30K in renovation money (cosmetic fixer, two units trashed, one not great, one ok) + $10k extra of my own funds to do some extras. It was a great experience. A decade later still the best move I ever made, it's a cash machine, and that $15k has had the best return on any investment I've ever made. But... I get times are different.
Feel free to PM me, the market has shifted and prices are coming down. Investors & Speculators aren't buying as much so it allows the opportunity for folks to try and do deals like this again. But it does mean you need to be careful, lenders and realtors aren't quick to admit the new risks of a falling market as they need to earn a paycheck. This doesn't mean don't buy, but you must buy smart and be ready for all outcomes.
You're going to want to build a team. You MUST use a contractor who has their $#@% together and you do not want to do anything but a STREAMLINED 203k this means only cosmetic repairs (no structural) and usually at or around 10% of the purchase price in repairs. The non-streamlined is not easy and can be a real pain. I've done the 203k and a conventional version. But both were a decade ago, both turned out well with some bumps along the way. Also, keep in mind the property MUST appraise for more than what you buy it + the repair funds they provide you.
The big thing is obviously finding the deal, and the seller willing to take your more complicated offer. The multi-unit play is tough here but if you can pull it off long-term it could work. Mortgage rates are nuts right now so making sure it pencils might be a challenge. I love this loan it requires really being on top of your game and finding a deal where you can add value and solve problems. I got my deal because I'd buy it with heroin dealers in one unit, the cash investors in 2013 wouldn't take that risk. It paid off for me, that was my advantage. It takes these types of moves sometimes.
I hope this info is helpful, I wanted to share as much here in case other folks needed this info too. I get this was nearly a decade ago so some things have changed, and others haven't.
Quote from @Mary Ainsworth:
Quote from @Tim G.:Wow thanks so much for the insight! Really good to know it worked for you in San Diego, I'll look into some areas that are maybe a little more questionable to hopefully find a deal that works better (still working on nlyzing deals). One follow up question - I read that you could still do a Full 203k (instead of streamlined) and still just do cosmetic repairs on the property,, I would just have a higher amount I take out for a loan. Are you saying Full 203k requires that there is also strucutral repairs?
Quote from @Mary Ainsworth:
Has anyone tried using a 203k loan in San Diego? I'm looking to buy my first property with 3.5% down and I want to force that appreciation by renovating it and tying that renovation cost into the loan I get.
Has anyone done this with a 203k loan in San Diego? And if so, any advice or recommendations? Thanks!
Hey Mary, my first purchase ever. It was a fourplex in San Diego with a 203k loan... this was in 2013 though. $325k purchase, $15k down, $30K in renovation money (cosmetic fixer, two units trashed, one not great, one ok) + $10k extra of my own funds to do some extras. It was a great experience. A decade later still the best move I ever made, it's a cash machine, and that $15k has had the best return on any investment I've ever made. But... I get times are different.
Feel free to PM me, the market has shifted and prices are coming down. Investors & Speculators aren't buying as much so it allows the opportunity for folks to try and do deals like this again. But it does mean you need to be careful, lenders and realtors aren't quick to admit the new risks of a falling market as they need to earn a paycheck. This doesn't mean don't buy, but you must buy smart and be ready for all outcomes.
You're going to want to build a team. You MUST use a contractor who has their $#@% together and you do not want to do anything but a STREAMLINED 203k this means only cosmetic repairs (no structural) and usually at or around 10% of the purchase price in repairs. The non-streamlined is not easy and can be a real pain. I've done the 203k and a conventional version. But both were a decade ago, both turned out well with some bumps along the way. Also, keep in mind the property MUST appraise for more than what you buy it + the repair funds they provide you.
The big thing is obviously finding the deal, and the seller willing to take your more complicated offer. The multi-unit play is tough here but if you can pull it off long-term it could work. Mortgage rates are nuts right now so making sure it pencils might be a challenge. I love this loan it requires really being on top of your game and finding a deal where you can add value and solve problems. I got my deal because I'd buy it with heroin dealers in one unit, the cash investors in 2013 wouldn't take that risk. It paid off for me, that was my advantage. It takes these types of moves sometimes.
I hope this info is helpful, I wanted to share as much here in case other folks needed this info too. I get this was nearly a decade ago so some things have changed, and others haven't.
I don't know on the full version, I was warned to do everything possible to avoid. It has many additional steps and I was glad to skip it. Some concerns of trying to pull that off are...
1. Non streamlined, you must pay a 3rd party to monitor the process. Added cost for no value to you
2. If the place only needs cosmetic, why seek more funds?
3. You will need to get the place at an even lower price to get these added funds as you MUST have purchase + repair funds be lower than fixed up appraised value. (in a declining market that could be additionally challenging).
Got it, I was just thinking if it needs more than ~30,000 in cosmetic repairs but I'll keep that in mind, I probably don't need that much!
Quote from @Mary Ainsworth:
Got it, I was just thinking if it needs more than ~30,000 in cosmetic repairs but I'll keep that in mind, I probably don't need that much!
In my case, it was based I believe on 10% roughly of the purchase price. So by today's standards it's likely a much higher number. But I am not certain on that so I would encourage it to be researched.
Another item I forgot to mention, I couldn't find a contractor willing to do the job and wait for payment like its setup with the 203K, they gave I think 1/3 up front and 2/3 when done. I fronted about $10k of my own cash to get things going and continue the work. Finding a capable contractor willing to do all the paperwork is tough and they will charge extra for it. At least that was my experience. I easily paid a 30-40% markup compared to my costs today on work but it had to be done that way.
Last fiscal year, 10/2021-9/2022, there were only 8 FHA 203k loans endorsed in the San Diego area & only 1 last month.
So, there are very few, if any, local lenders that have extensive experience with the 203k.
You'll have to search for national lenders that are licensed in CA. Check out Family First Funding, Marco Montano Vice President of Sales - Renovation Lending 720-499-0001
Luckily there is at least 1 contractor in the area on the 203k Contractor Directory that has taken the extra steps to earn the accreditation as a Certified 203k Contractor.
You're only as strong as your weakest link ... select your partners wisely.
Hope this helps!
#2 Mortgage Brokers & Lenders Contributor
- Lender
Quote from @Mary Ainsworth:
Has anyone tried using a 203k loan in San Diego? I'm looking to buy my first property with 3.5% down and I want to force that appreciation by renovating it and tying that renovation cost into the loan I get.
Has anyone done this with a 203k loan in San Diego? And if so, any advice or recommendations? Thanks!
It is very possible. Especially in this market. Happy to connect and offer some insight.
-
Lender California (#02161719)
- 818-269-7983
- https://www.luxeprivateinvestmentsllc.com/
- [email protected]
@Mary Ainsworth look into the NACA program (neighborhood association corporation of America). It's a variation of 203k but is designed specifically for value add owner occupancy properties. I did this in my LA property and it's been paying dividends once it was complete. It's a hard program and will need to be property specific but in this rising rate environment it's turning to a buyers market. Good time to jump on the run down four units.
Cool tips, just fyi ... the Streamline 203k no longer exists.
HUD eliminated it 7 years ago back in 2015 and replaced it with the Limited 203k, which does have some similarities to the Streamline but the elimination also ushered in some changes along with the new name.
Hope this helps!
Quote from @Tim G.:
Quote from @Mary Ainsworth:
Got it, I was just thinking if it needs more than ~30,000 in cosmetic repairs but I'll keep that in mind, I probably don't need that much!
In my case, it was based I believe on 10% roughly of the purchase price. So by today's standards it's likely a much higher number. But I am not certain on that so I would encourage it to be researched.
Another item I forgot to mention, I couldn't find a contractor willing to do the job and wait for payment like its setup with the 203K, they gave I think 1/3 up front and 2/3 when done. I fronted about $10k of my own cash to get things going and continue the work. Finding a capable contractor willing to do all the paperwork is tough and they will charge extra for it. At least that was my experience. I easily paid a 30-40% markup compared to my costs today on work but it had to be done that way.
Ah thanks for letting me know, I'll need to start looking for one pretty soon here
Quote from @Paul Welden:
Last fiscal year, 10/2021-9/2022, there were only 8 FHA 203k loans endorsed in the San Diego area & only 1 last month.
So, there are very few, if any, local lenders that have extensive experience with the 203k.
You'll have to search for national lenders that are licensed in CA. Check out Family First Funding, Marco Montano Vice President of Sales - Renovation Lending 720-499-0001
Luckily there is at least 1 contractor in the area on the 203k Contractor Directory that has taken the extra steps to earn the accreditation as a Certified 203k Contractor.
You're only as strong as your weakest link ... select your partners wisely.
Hope this helps!
Man this is cool data, thanks for sharing.