All Forum Posts by: John Winters

Greetings BP,

I appreciate any tips and/or answers that anyone can share.  Here's the scenario and questions; I'll aim to be concise.  Thank you.

* Scenario: My Wife and I plan to use an FHA in my name to buy/renovate a triplex. Once bought & working on it, we plan to put money down on land, which will then have the title put in our names. We have an opportunity to buy this land at lower-than-value cost. Once the land is in our name, we intend to use the land as collateral (equity) for a 'down-payment' for a construction-to-mortgage loan and build a home (nice, but modest single family). Once built, we pay the discounted land in full with equity loan. In the end (of this scenario) we will have an income-generating triplex and a single-family home (I have some other ideas how to generate income for our single family home.).

Does this plan, based on simple outline, have any glaring flaws in it?  Does it seem realistic, especially the financing aspect of it?  Any tips or suggested alterations to the plan?

Again, thank you for any and all constructive responses - answers, tips, suggestions.

Good morning Brent,

I have not used an fha203 yet, but I have also been preparing to use one in PA.  For what it's worth, my lender here told me that any contractor that has worked with fha203 buyers previously are already aware and are financially capable of working with the payout schedule.  They know what to expect, is what I'm told.  If the contractor is new to fha203, they will have to be approved by the lender, which would include a financial check-in (with evidence) to make sure they are able to work with the payout structure.  Also, while there is a range in what's considered "quality work," if the contractor's work doesn't meet specifications, payment, I'm told, will not be released.

From the contractor's perspective, it's highly monitored work, but also secured money for the job well-done, so many contractors will do it...is my understanding.

I hope your project goes well!

Greetings BP,

I'm a HS teacher & NEW investor in PA. I see a few property packages and a single-family properties of interest, some above the FHA caps, but worth what's being asked. Of course I will only buy a property or package of properties that will pay for themselves, so I am not overly concerned with paying for them over time, & I am approved at the max FHA rates for single family & multi-units. However, to pay for properties over the caps (package or single) -- with motivated sellers -- would something like this be possible, if agreed upon?

**Single property:  Buy property at half-asking price with an fha (or conventional) loan.  Make it 'subject to' me taking a loan from the instant equity to pay the seller the other half.

**Property package: Pay the price of one property at asking price with fha (or conventional) loan, seller agrees to deed both/all properties to me, 'subject to' me using instant equity to pay the remaining price for the remaining original asking balance.

Is this legal & workable if the seller agrees?  Are there any challenges/obstacles to this approach, if agreed upon?  (I know the lending institutions will typically lend a percentage, I think ~80%, of the appraised value.). I feel like there must be a 'catch' to this approach - something obvious (or not) that I'm missing.  However, if this is possible, great!  I'm guessing a real estate attorney would be the best person to draw up this type of contract? I'm new & learning, and I appreciate all support and tips.  Btw, I'm okay with using the current equity, as long as the cash-flow is positive. Thank you for any and all insight, even if it may seem obvious!

@Eric Greenberg Hey Eric, thanks for jumping in too!  I see you're in Philly as well.  Nice.  That's a good point.  It has the sprinkler system required (I believe) for 4-units+, but I don't recall there being a zoning variance specifying 5-units.  I'm going to check on that...thanks!

Thank you everyone for sharing!  I greatly appreciate your feedback and the information.

@Steven Goldman Steven, it's good to meet you here online.  I see you are in PA too.  I am definitely starting to see the value of your point -- 'find the product to match the problem.'  I am beginning to see the depth of options - and parameters!

@Steven Goldman @Wayne Brooks I appreciate the insight about the 221d4. I'm not there yet - constructing large multi-units is a goal, but for now, I have to humbly work up to it -- the 3.5% down (FHA) is working best for me at this point. Thanks Wayne, for the straightforward clarity - '5 units is 5 units.' I'd like to use the fifth as a personal office, even with the kitchen for ease, BUT I hear you - that's not going to work without alterations.

@Greg H. Thank you! For this property, I believe this will be the path. It's already priced a little on the high side ("upcoming neighborhood" price), and FHA 203k won't let me do the work of taking out the kitchen myself, so that's more money of course. I might be able to slide this in on a 203k and still have the numbers work - or maybe the current owner will agree to do it for a somewhat quicker close.

I'm guessing taking out the kitchen means removing appliances, faucet(s), and capping lines; cabinets can stay.  Then this space can be my personal office, and lenders will be satisfied.  If so, that's not too crazy.

Again, thank you everyone for sharing - this is much appreciated!

Greetings All ~ Thank you in advance for any support with this.  

I've been looking for a 3-4 unit multi-family to purchase with an FHA loan (or FHA203 if needed). While searching, I found a 5-unit property that is of interest. I know the types of FHA loans I plan to use are limited to 4-units max. At this particular property I would live in a 1-bdrm unit on the third (top) floor.

***There's a small unit with a separate entrance on the first floor (rear).  To qualify this property for FHA lending with 4-units max, can I simply use this unit as my personal, at-home office - even if it is not attached to the unit in which I will live?  

Does anyone have any ideas/experience with getting this to qualify for the FHA financing?  I would actually like/want office space, but I may convert it back to a unit later, even if years later.

I'm in Philadelphia, PA.  I've heard of people turning one unit into storage too.  I'm open to ideas, I just want to be confident it will work before moving forward with the process.

Thanks again for any help.