All Forum Posts by: Matthew Porcaro

I’m responding to the original posters question who mentioned that they’re open to using 
it as a funding option and wanted more information on it. 

when I see information that’s posted out there about it that’s inaccurate, I chime in. 

you can check my account and my previous posts and see that I myself struggled to find the right information about it when I first started into investing. 

the 203k is great for house hacking, which in and of itself is an investment strategy. 

you can use the BRRRR strategy with it as well because you can build equity into the property and use that equity to go buy additional real estate.

yes, the caveat is owner occupancy for a year. And if you follow the guidelines, as I mentioned above, you can go and refinance and move and do it again. 

Fannie Mae has also changed their guidelines with buying multifamily homes with only 5% down if you occupy the property. And you can have up to 11 of those loans under your name. 

so the process is repeatable as long as you follow the guidelines. 

im not saying its the best option, but im saying its a viable option, and what annoys me most is when I see so much misinformation posted about it anywhere. 

the reason I created my YouTube, Facebook, and Instagram communities around the topics was because I saw how many times people were posting here asking questions about the 203k and were getting the wrong answers or mislead constantly by people with no deep & hands on experience with the program. 

I’ve made thousands of hours of videos and posts  on the subject, all on YouTube Instagram and FB

My only goal is to stop the misinformation and make people aware that it exists and it’s indeed a viable and quite honestly only option that worked for me after years of trying to break into real estate investing in a HCOL in NY. 

No idea where you're getting $10-15K in "fees" on a 203k. The HUD consultant would be a maximum of about $1500 or so, and that includes the draws and an inspection on the property, and a full creation of a scope of work. A lender is going to charge anywhere between 2-3% in origination points, and that's no different than any other mortgage. Not to mention, all of these fees are wrapable into the loan.

Also, recommending a HML for someone that's new, saying that it's somehow easier than working with an FHA 203k doesn't make much sense. HML's require their borrowers to have experience in construction or flipping, where a 203k does not. The reason for the few extra pieces of paperwork is to help people with no experience have a more controlled process. I worked in large construction in NYC for over 10 years. Everything required on a 203k is how every construction project should be handled. Having a clear scope of work, a vetted, licensed and insured contractor, and someone to objectively inspect the work is not a "pain", its how every project should be handled.

But the biggest most glaring difference, is you only need 3.5% down on an FHA 203k. On a HML with someone with little experience, you're looking at 25-30% down.

The vetting of a contractor and having a 203k consultant involved is a small price to pay for getting 110% ARV LTV potential for someone with little experience.

Im in long island area, but have helped several people do 203k's in NYC. The new Fannie Mae 5% down HomeStyle product on owner occupied multifamily is very similar to the 203k. 

The pros and cons are limited. Pro's of it are Fannie Mae is a bit more flexible with guidelines, and looser on renovation requirements. It also technically doesnt require a hud consultant, which some say is a positive thing, but I'm not convinced. Because with the right consultant they can provide a ton of value such as creating your scope of work and validating the contractor bids for feasibility. You also get lower Mortgage Insurance on the fannie mae version, as well as no up front mortgage insurance payment (1.75% of the total loan amount due at closing) then 0.55% year over year. 

Cons are the conventional product is a lot less forgiving on credit score and LTV. Your credit should be in the 700's to get the best rates and terms. Also, depending on the number of units, they may require you to get a property management company if you have no landlording experience. That came up in the guidelines but I'm not sure how much lenders are enforcing it.

I know several lenders that do these in NYC and am happy to intro you if you need. 

There are so many different strategies to finding off market deals. I'll tell you how I found my own primary residence in a very competitive market as well. 

My wife and I drove the entire neighborhood and took down every address of a property that we saw ourselves purchasing. We were looking for fixer uppers in a very specific area of Long Island NY, and were only looking for Capes, Colonials, and ranches. 

The more specific your criteria the better, because it makes the next step a lot more efficient. 

We then mailed to all of the property owners using Ballpoint Marketing mailers. They're about 1.80 a piece of mail, but they're handwritten and sent on greeting card style stationary. 

I mentioned that me and my wife were outgrowing our apartment and looking to move into the area. The response rate was great, and we ended up finding an older lady who was moving to a senior living facility and wanted to sell the house as-is with no contingencies. We used a fannie mae homestyle loan to take it as-is and renovate it using the banks money. 

The Facebook/Craigslist strategy works too. 

 I know a year may seem like a long time, but remember real estate investing is a long game. When I got my first duplex using a 203k, especially it being a fixer upper, the renovation alone took almost 8 months to complete. I wasn't in the property very long until I had the ability to refinance and continue on my journey. 

Dollar for dollar its the best way to start and your money will go a lot longer in the long term. 

As far as finding properties off market, I wouldn't focus too much on wholesalsers if you're looking to do a 203k or homestyle reno loan. I'd focus on agent outreach. Go to zillow and sort by lowest prices in your market. Call every single listing agent (include pending sales) and let them know your criteria. Keep them on a list and follow up with them. If there are agents that are receptive, invite them to coffee or a lunch and build those relationships. 

My flipping business was entirely built on agent relationships. At the end of the day they're the ones that get the lowest hanging fruit. 

Other off-market strategies work, but you have to be willing to put the time, money, and effort into sticking with it long enough to see results. 

203k Fees are not inherently high. Some lenders put overlay fees on them because they don't specialize in them and see it as a headache. There are lenders out there that have no overlays on their 203ks, they're the lenders that specialize in renovation lending. You need to shop the origination points. I've seen some go as high as 5-6% which is egregious.

Every branch is different, but look into Cross Country, Guild, Cardinal, & NJ Lenders

Ok well, that was misleading. There's no contractor list. Any contractor that is licensed, insured, and experienced can do a renovation loan. I've worked with countless contractors that have no problem doing this process. It's really not much different than hard money draws. If a contractor has done insurance work, they can do 203k loans. 

 This isn't true. Where did you hear this from? 

@Austin Martinez

Thanks for the shoutout, Scott!

Hey Austin! I love your idea because it’s exactly how i got started with investing.

I’ve helped hundreds of people replicate the process. the 203k loan is insanely powerful when leveraged correctly.

The fact is, many people don’t have the patience or the resources to pursue it effectively.

I work pretty hard to help clear the air for people looking to take advantage.

To answer your other questions.

2. The best way to find a 203k loan is by working with lenders of brokerages that specialize in these types of renovation loans.

There’s plenty of these guys and gals out there. You just need to look for their circles.

One easy one is google the 203k endorsement summary. Go to the HUD page and scroll down to the bottom to the most recent month and year.

It’ll spit out a report that tells you which companies have done 203k’s in your market.

Call them up and ask them who heads up their reno loan dept.

That way you have lenders that understand the process and can make it easier for you.

3. You can absolutely use a 203k for offmarket deals. I’m in the process of doing another one myself found using off-market leads.

As long as you find a seller that isn’t looking to close on an exact date, you can still purchase as-is, beat up properties.

Hope this all helps my man!

Matt

@Philip Roedig

Definitely don’t use someone that hasn’t done it before lol. That’s the most classic mistake people make. Myself included.

There’s plenty of experienced 203k lenders on Long Island that you can use instead.

You can look up Intercontinental Capital Group, Mortgage Possible, Caliber Home Loans to name a few that I know of off hand.