All Forum Posts by: Jeff Onofrio

Hi Porsha- a Homestyle loan will not work in this scenario.  Homestyle does not allow for ground up construction only for a major rehab but also limits you to 75% of the after repaired value.   I think you need to more likely look at a CTP (construction to permanent) loan and your best bet with that tends to be a local banker in your area.  Homestyle will allow you to finish a “substantially” complete home but that is one that is already 90% complete.   Hope this helps! 

@Rick Albert @Ryan Daniel

The VA construction loan is similar to the FHA 203k limited. Most companies will not go over 35-50K in reno and typically does not allow structural renovations or additions. Its guides are open a little, lender by lender than the 203k or Homestyle products. Hope that helps!

Hi @Jay P.- I have been involved in hundreds (probably over a 1000 if I really look into the numbers) of 203k’s from the lending side.  I have 2 closing this upcoming week that are purchases.  I am going to totally agree with the comments above the most important parts of this type of deal are contractors who get it and a lender with a team to help get them done.  Without these two pieces of the puzzle you are setup for failure.  With that being said grill the contractors and lenders.  It can be tough right now as contractors are super busy and so are lenders for that matter but do not rush it.  Ask questions and get things in writing.  203k’s when done right are the ultimate investor startup key.  Where else can you buy and renovate with so little out of pocket and create instant equity and cash flow based on the scenario?  

@Sean Brown The Fannie Homestyle Renovation loan is the way to go. However not every conventional lender can do them and even the ones who off it I would not automatically go with them. You need to investigate whether they are experts at doing them. Going to any lender can be disastrous for you and your contractor. Find out how many they have done, ask for referrals, ask for the HUD consultants they have worked with. Depending on your town I can happily recommend a consultant or two.

Good luck! 

That’s awesome!  Congrats!  Building instant equity is huge- time to rinse and repeat! 

@Riley Blake - I do not agree with either comment above.  I have closed or have overseen thousands of 203k and Homestyle renovation loans and helped those people create tons of instant equity.  

To @Sasha Mohammed's point they can be somewhat difficult but really that is based upon who you are working with and the team they have around them.  

**The down payment is based upon the purchase price (acquisition) + rehab budget (budget + contingency reserve and any allowable financeable fees) X 3.5%= Down Payment 

** Any contractor will work who is licensed and insured and can provide a resume.  Biggest issue with finding contractors is one who is ok with the draw/payout schedule as they are only paid for work in place. 

Again it really comes down to your team. Good team, good communication = successful renovation project.  

Any questions feel free to call, DM, text, email.  Happy to help! 

@Rodney Harris you could do this using a Fix and Flip program. I recognize you do not plan to flip it but all you would need is a refinance out of the Fix and Flip program within 12 months. Typical terms 10% down on acquisition and up to 75% of ARV (which if high enough could allow for 100% financing of the renovation budget). If ARV is right then you can just refi out into a conventional at the end of the project before the balloon payment comes at the end of the 12 months.

Hope this helps! 

@Rachel Coleman- I am going to agree with Jerry.  A multi family property were the other renters pay most if not all of the mortgage is the way to go.  You are able to qualify off of the proposed rents for the additional units so even if you have low income yourself this option becomes viable.  It's also a great way to start your investing career.  

1 thing to keep in mind- if you go FHA and it is a 3 or 4 unit property the property has to be able to self support itself. Meaning let's assume the payment for the mortgage is $1000 then the units (including the one you plan to live in) must cover the mortgage minus a 25% vacancy factor.

Hope this makes sense! 

@Curtis Naugle - 203k loans are for primary residences only.  The alternative is the Fannie Mae Homestyle Renovation loan which allows for investors.  It requires a minimum of 15%  down payment.  

Any questions- let me know.  Happy to help!  

@Peace Lily

Hi Peace- first thing is FHA does not approve or deny a loan. The lender does and FHA just insures it. Second the real issue here is motivation. Typically and underwriter will have an issue when someone makes a move from a a duplex to a triplex or a SFR to a multi as the perception is that you are doing it for investment purposes and thus the motivation does not jive with what FHA is used for. If you read the guides it specifically says that FHA loans are not to be used to accumulate investment properties. So a few things that will not pass the sniff test- a family of 4 moving from a 3000 sq ft single family home and moving into 1 unit of a 4 unit complex with only 2000 sq ft- see what I am saying- what would be the motivation and how could an underwriter justify it?? An FHA (DE) underwriter has to justify all loans they approve and be able to defend it if the loan goes bad otherwise there DE credentials could be on the line. However if you are going from a 2 unit like you said and lets say the new 3 unit is bigger in square footage and has a better school district, closer to your work, etc a case can be made. A lot of times it is in the presentation of the file to make it make sense to an underwriter.

I hope this helps- feel free to hit me up with any other questions.  

Happy investing!