The FHA 203k program is specifically for primary residence properties only. It is not intended for investment purposes in the sense of buying a home, renovating it with the FHA 203k, and then selling it. A process that is better known as “flipping.”
There is, however, a situation in which someone could legitimately utilize the FHA 203k in an investor-like fashion. If a homebuyer were to purchase a multi-unit (multi-family) property in which one of those units were their primary residence, then they could use the FHA 203k to renovate the entire property (up to 4 units). They could potentially rent out the other units (1, 2, or 3) and have the tenants pay part, all, or even more than the cost of the mortgage.
For young investors looking to get their feet wet in the investment world, buying a multi-unit (multi-family) property and financing with the FHA 203k may be the answer. Ultimately, an investor would be able to get into a multi-unit (multi-family) property with as little as 3.5% down and have their tenants pay part, all, or even more than the mortgage cost. Two years later, they could turn around and refinance the property out of the FHA 203k and into a conventional type loan. Once that happens, they could start all over again!
This is the only way an FHA mortgage can be used for investment properties. The 203k program is not widely known but it is a great vehicle for a first time home buyer, an investor looking to get a start with limited funds, or someone who just wants to live rent or mortgage free.
Getting creative and working within the rules of the FHA and the FHA 203k renovation mortgage can be a starting point to you and your investment future!