All Forum Posts by: Matthew Porcaro

@Christian Bernhagen

Everyone thinks their market is extremely hot. The reality is there’s no foreclosures or low-end as-is deals on the market, plus bare minimum interest rates are inflating prices a bit.

That said, this shouldn’t be a reason for you to move off of your criteria. Deals are found in every part of the market cycle. Sometimes it’s more challenging than others, but as they say - pigs get fed and hogs get slaughtered.

Don’t get caught up in the hype.

@Scott Wolf thanks for the recommendation, Scott!

A 203k or HomeStyle loan would be perfect for this kind of property. No need to refinance into the loan, you can purchase and wrap in renovation costs into one loan with these.

Remember though, these loans are for owner occupants, so you must make this property your primary residence for at least a year.

That said, the live-in flip strategy is how a lot of investors start building wealth quickly with real estate!

203k only if you live in it, AND if you do show that you're moving, expect your loan underwriter to question why you'd be moving from a SFR into a MFR. That goes against conventional wisdom, which you'll have to prove otherwise.

Homestyle would most likely be your best bet for a SFR live-in flip.

The Fannie Mae Homestyle and Choice Renovation Loan from Freddie Mac are both similar to that loan. They require 3% for first time home buyers and and single family purchases that need renovation costs wrapped into the loan. 

They generally need a slightly higher credit score, but are also a bit more forgiving from the paperwork side. 

People use the 203k often for small multifamily properties because with the FHA loans, no matter how many units (1, 2, 3 or 4) it's still only 3.5% down.

The Homestyle, for example, has higher down payment requirements based on the number of units you're buying. 

An experienced renovation loan mortgage lender will generally suggest which renovation loan program will work best for your goals. 

I can't see why not, but the underwriters on the loan are going to be looking at this hard to make sure you're actually living there. This is an owner occupant loan, so they're going to need to see intent that you're actually occupying the property and not using at a fix and flip loan. 

This really is a question for your lender. You could ask a few different one's to get their comfort level on it. 

Definitely keep me posted on what you hear back, I'm curious about this one. 

Would you consider moving into the property for a short time to qualify for owner occupant renovation loans like the 203k or homestyle? Owner occupant reno loans allow you to wrap the renovation costs into the mortgage, so the only out of pocket costs to you are the down payment & closing costs. 

Some people forget this, but I always tell househackers, you NOT having a rent/mortgage payment every month, is NET cash flow to your finances. 

For example, if you were previously renting an apartment at $1500 a month, and you do a househack, where the tenants just about cover the mortgage and taxes, and you maybe have to kick in only an extra $100/mo...

You're still NETTING $1400 per month on your expenses. 

Not to mention the huge payday you'll get in equity if and when you sell or refi in the future --- all which you never really contributed to!

@Payten Mox

A lot to unpack here, but #1, every market is “hot” haha. Especially recently with no foreclosures due to eviction moratoriums, you have virtually no low end properties out there to create a balanced healthy market.

#2 not sure what you mean when you say 203k’s require multiple bids from contractors. They technically do not, but regardless on any flip project when you’re starting out you should be getting at least 3-4 bids to be able to compare numbers. It would be wise to do the same thing if you used hard money.

#3 hard money is always an option, but typically for borrowers with no experience in flipping, the ones that even lend to people with no experience, will be hitting you pretty hard with rates. They’ll require

20-30%+ down payment, and interest rates upwards of 12%. You really need to find great deals for these loans not to beat you up on holding costs and acquisition costs.

#4 you can't combine hard money and 203k. 203k is an FHA loan which requires the borrower to have at least the 3.5% down payment from their own savings, or a gift from a family member. But remember, all you need is 3.5% down...which is very doable for anyone with a modest savings. You will need to forecast closing costs as well, but you can always negotiate the seller to cover a portion of closing costs if you need help with that.

#5 you can definitely do a 203k on a SFR. Find a really distressed home that fits your budget, check the ARV of minted out homes nearby, and if you can keep your acquisition + renovation cost a significant percentage (20%+) below the ARV, you've got some equity there you can tap into in the future. That said, it looks like with your income you might hit some roadblocks with Debt-to-income ratio. So you would need to focus more on multifamily properties. There's obviously way less of these than SFRs, but it's definitely worth the wait if you can find one.

Hope this helps. A lot to unpack but you seem like an eager young dude, and if I can help clarify some things for you, hopefully it'll lead you further down the path. 

Matt

@Misti DelMar

Yep! it’s basically just a quick case study about my journey with the 203k, how I leveraged it on my first deal, mistakes I made and how you can avoid them, and steps to take on your own journey to get started.

If you have any other questions I’m always here to help.