All Forum Posts by: Matthew Porcaro

Hey Bryce - you're on the right track, man! That's exactly how I got started. As you mentioned, the 203k isn't a cookie cutter deal and comes with challenges, but that's honestly what makes it special. 

If it were easy, everyone would do it, and it wouldn't be as powerful as it is - in my opinion!

Definitely stay away from the big banks for this type of loan. Again, these banks are typically "cookie cutter" deal makers, and most of their systems are based around a strict set of requirements with little leniency. 

You want to find an experienced renovation lender that specializes in loans like the 203k.

As mentioned above, HUD keeps record of every lender that endorses 203k loans each month. You can find this by googling the "203k endorsement summary".

Click the first link (HUD website) scroll down to the bottom to the most recent month and year, then open that link which will spit out a pretty ugly notepad file haha.

This file says what lenders in each major city have endorsed 203k's loans this month, and this year. 

Search through for the market closest to you, and use your browser's search function to search everywhere where that city comes up, and make a short list of any of the lenders that did deals in your market. 

Then, go ahead and look up each company and their local branch. Give them a call, and ask them to connect you with the loan officers that specialize in renovation loans in their office.

Make a few calls and I promise you'll find a few lenders willing to help. Question them on their experience, and pick which one you feel comfortable with!

The lender quarterbacks the process. From there they will assign you a consultant, who will also be a valuable player, especially if the consultant is experienced as well (which they should be if this experienced lender has a good relationship with them)

This was a lot, but hopefully it makes sense for you and gives you a jumpstart. 

Good luck bud!

Honestly Craig, the biggest red flag here is it seems like your lender isn't experienced enough with this loan. You want one with ample experience. Don't make the mistake I made when I did mine. 

Your lender should know that the 203k consultant's inspection is required first to acknowledge that this project is even feasible for your budget, and will be able to encompass all of the standards FHA requires in terms of repairs, code compliance, etc.

Have you asked your lender how many 203k's/renovation loans they've done in the past? 

Your issue here with doing something like an FHA or conventional financing is your loan limits in the area. In the highest COL areas of the country, you don't see FHA going much higher than $1.5M, and that's for a 4-plex.

You might need to look into more private banks or HML's that can give you a customized loan plan.

One issue to is the lack of comps. Lenders are going to need to see comps that support your valuation, and unless you can bring them something solid (depending on the bank) they will be weary of writing the loan. 

If the seller is willing to accept seller financing, why don't you just stick with that?

@Drew Harris

As long as it’s code compliant in your jurisdiction that should be no problem.

@Stanley Tong

Thanks Scott!

Hey Stanley - this situation would be perfect for a 203k loan. I actually did the exact thing you’re trying to do a few years back. It’s what started my investing career.

First thing you need to do is secure an experienced renovation loan lender. There are a few ways to do this. One of them is to lookup the 203k endorsement summary on Google.

Go to the first site (HUD website) and scroll down to the bottom to get the most recent month and year.

This will give you a list of lenders and how many 203k loans they’ve done this month and this year. Scan through to find Dallas and make a list of lenders.

Give them all a call and see who is the head of reno lending in their departments in your city.

That should be enough to get you a good start.

The lender is the quarterback for these loans. One that’s experienced will help you stay the path, as it does have some extra nuance.

But overall, it’s extremely powerful when used correctly.

Let me know if you have any other questions!

@Connor Seymour

Hey Connor, it’s great that you’re already saving for your future!

One thing to consider with some of these bank loans, FHA or 203k specifically, they're going to be looking for 2 years of stable income from your career, so depending on your resume, that could deter you a bit.

You can always get a co-signer or a partner to cover for that.

Either way, keep saving and maybe find some investors in your market and see how you can help them.

Exposure is going to be the best thing for you at 18.

Best of luck bro!

Matt

@Brad Sneckner

The reason I brought it up is it’s a very common misconception that holds people back.

Any licensed, bonded, and insured contractor can qualify.

You would want that all anyway, for my flips everyone I use is licensed and insured. Never worth saving a few bucks and taking the risk.

These requirements are in place not only for the lender but for the borrower.

To many people use crap contractors and they get allured by cheap prices and end up having them walk off the job or fail to complete it because they ran out of funds.

@Brad Sneckner

What’s an approved contractor?

I'm really sorry to hear that man, there's just a dropped ball on a couple of things, but I would definitely get a lawyer involved ASAP. 

As for the 203k consultant releasing funds for a project that wasn't completed, you can report that consultant to the HOC. https://www.hud.gov/program_of...

Let them know the situation that there was some shady dealings, and you could technically go after the 203k consultant as well. 

Just make sure you have pictures and proof of everything. 

Also, not to pick on ya, but never just take the 203k consultant's word for it. You definitely need boots on the ground and to see the work yourself throughout the process.

The unfortunate reality is even though this person is supposed to be checking, ultimately no one cares about the project as much as you do, and sometimes if you want things done right you need to take it into your own hands. 

I was at every 203k draw inspection for this reason.

That said, you live and learn, and hopefully it was towards the end of the project, but I think you definitely have some grounds for legal cases against both parties. 

Best of luck man!

The caveat to the non-owner occupied HomeStyle loan is that it can only be a single family, that's why I asked. Sorry, should have clarified. 

With some other properties under your belt, it might be worth pitching this deal to a bunch of smaller banks and credit unions. If you pitch it right, many avid bankers would be willing to work out a customized mortgage offer for you!