FHA 203k Mortgages & Multi-Unit Family Properties

By
Mortgage and Lending with AnnieMac Home Mortgage NMLS #38670

Another Great Use!

Buying and rehabbing a multi-family unit property can be done using the FHA 203k loan.  I’ve done a few of these loans and they are absolutely great!  I’m currently doing one right now -- it’s a four-unit property and it's a big job. The FHA 203k loan limits, which you can check out here, are much higher as the units go up.  So, the total rehab cost for this four-unit property is over $600,000.  It’s an enormous project and it's one of the really cool things the FHA 203k allows you to do.  In this situation, this customer is going to live in one of the units and, ultimately, he is going to be collecting income from the other three units.  So, by doing this rehab, he is going to be able to bring in a good portion of income on a yearly basis.  It’s one of the great features of the FHA 203k loan.  The maximum amount of units you can do is a four-unit property.  You can obviously do two units; you can do three units- it all just depends on what is available in your area.  FHA 203k loans are greatly for these types of properties, but the important part to remember is with any FHA 203k loan, it is for primary residences only.  So you must, YOU MUST live in one of the units.  This is extremely important because, again, the FHA 203k loan is not for investors.  Investors may be coming down the road, but for now, this is not for investors, it is only for primary residences only.

Reserves With 3-4 Unit Properties

Another thing to keep in mind is that with three and four unit properties is you must have a certain amount of reserves.  The amount of reserves is three months, which, again, is liquid or retirement funds- anything which would be considered assets in some sort of bank account or IRA.  Basically, something that we can show that they would be able to tap into in case they would run into problems, but, again, this is only required for three and four-unit properties  The three and four units must self-support as well, which means the rental payments must be able to sustain the mortgage on its own, so that’s another important feature to keep in mind when you're talking about a three or four unit property.

Two unit properties are just like a one unit.

But, again, there are little special nuances when we’re talking about multi-unit properties.  There's a lot of areas in the City of Philadelphia, for one.  The large project that I'm doing right now, the $650,000 rehab, is in Jersey City.  It's really close to the subway, which allows somebody to get back and forth from New York which is great because there's a lot of people in New York that rather come to New Jersey for the cheaper rent and the ability to save a little bit money.  Those are other good reasons why those properties are so popular in such areas.

Supplement Your Income!

The FHA 203k mortgage allows for some great different types of properties and allows you to really make some money.  As a landlord who lives there, an occupying landlord, you're able to make some additional money each month and that’s a great thing to supplement your income.  And in these times-  there are more people renting, so it's great for anybody who's interested in adding a little bit of extra money in their pocket and building equity you should consider doing an FHA 203k loan on any multi-unit family property.

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Topic:
Mortgage / Finance
Location:
New Jersey Burlington County
Groups:
FHA 203-k and FHA 203-k Streamline Loan Group
The FHA Mortgage Group
Tags:
certified 203k contractors
fha guideline
fourunit
full 203k
mortgage
multiunit
renovation
rental property
threeunit

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Rainer
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Deven teaches Investing for Realtors. Up to 42X your commission with less work
Real Estate Faster - Los Angeles, CA

Thanks for sharing, that is a great way to supplement your income as an occupying landlord!

January 18, 2012 12:43 PM #1
Anonymous
Anonymous
Kevin the 203k loan guy

A nice niche!  In this day and age it's hard to find niches but the 203k loan and all its possibilities, in this market is a true gem. Nice job.

January 18, 2012 03:12 PM #2
Rainmaker
33,120
Jeff Onofrio
AnnieMac Home Mortgage - Mount Laurel Township, NJ
FHA 203k Lender and Homestyle Reno Specialist

@Deven- thatnks for commenting- the 203k loan is an important product in our search for an answer to the housing rebound.  It will be even better when they open the program back up to investors!

@Kevin - thank you and your right.  Our industry needs some bright spots and this is one of the few.  I appreciate you coming by. 

January 26, 2012 07:43 PM #4
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sds

Interesting stuff...

ahmedabadonnet.com

January 31, 2012 10:26 AM #5
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Rainmaker
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Jeff Onofrio

FHA 203k Lender and Homestyle Reno Specialist
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