Is this an FHA 203k possibility?

Home Inspector with, covering the USA S0289

Are these potential for FHA 203k loan to renovate?

1) Barn sitting in the middle of a country property, that someone has converted to living area years ago, May or may not have permits, no other structures on the site. Maybe you know of one like this.

2) A warehouse downtown where home construction has grown closer and closer to the property until it is the only vacant property in the neighborhood. It is the only non-residential property left on the block, can we use the 203k to convert it to resdential use?

3) Mixed use building has been an eye-sore for years, maybe a fire trap, creating a nusance to the neighbors. Can we turn this around and get it sold under the FHA 203k loan program?

4) An older home built with no perimeter foundation. Can we put a foundation under it using the 203k?

5) A home in our neighborhood was involved in a fire that took it down to the foundation. Can I rebuild the home using a renovation loan?

6) There is an old home I pass everyday on the way to work that was mostly destroyed in a fire many years ago. It just sits there and no one has done anything with it for so long, If I got the listing could we list it as a "fixer". 

7) I have this 8 unit building in my neighorhood that has been vacant for years and was gutted, all the copper wiring and plumbing has been removed long ago. It is just a shell now with exterior siding, no drywall, electric, or plumbing exists, Can we fix it up under one of these renovation products?

The original guideline as I read it would say it had to be a 1-4 unit building in order to qualify. In reality the guideline has has always been interpreted as it must be a 1-4 unit buidling upon completion of the project. That means the zoning must be approved for that change.

1) A barn? that may be stretching it a bit, but... lets do it. Yes provided it becomes a legal residential 1-4 unit building when complete. To be more specific, YES, this can be financed through the FHA 203k loan program.

2) If a warehouse we must have confirmation that residential, mixed use, or "live-work" would be approved. Upon getting that in writing from the city or county this would be a 

3) Mixed use building vacant eye-sore for years... not a problem again. In fact there are about 25 of them sitting vacant in Stockton CA that would be a gold mine for anyone looking to revitalize the downtown in that, once bustling city. Why is this the best choice to fix these buildings up? Simply because it is an "owner occupied" product. The owner must live in one of the units. This type property is great for a young investor who has a business that he can use the commercial space or a portion of the commercial space to run their own business.

4) If a home has had a CO - Certificate of Occupancy, for more than a year it is a potential for a 203k. We have done a couple homes over the years that were built like a pole barn. In one case the home had six poles with creosote much like a telephone pole and then stringers were nailed across tying them together and creating the basis for the rest of the structure. I really hated to have to put a perimeter foundation as there was nothing wrong with the current foundation. We had a 104 year old home in Marin County CA with no perimeter foundation, it has one today.

5) All of the recent fires in CA and CO have left lots of devastation and from partially burned properties to fully destroyed properties. If there is a foundation to work from we can rebuild the home(s). If there is nothing left, call me, HUD may work with cities, counties, states, etc to allow them to be rebuilt under the program, they might not. If we don't ask, it will be a big NOT. But you may be surprised when they do allow it. We have actually done things outside the guideline where HUD came to us.

6) I see one of these in San Jose off Felter Road that would make a great renovation project. The burned out remains are sitting atop a hill with a potential panoramic hills and valley view. You see what appears to be 6" steel posts and some other structural steel that from the street appears is still in tact.

7) The eight unit building scenario is an actual deal we did in the 90's where we had 8 studios vacant leaving just the shell of a building, no plumbing, electrical, and no drywall. This was better than having to remove all that and paying for the demo. It has been vacant for so many years we had no problem getting the county, in this case, to give us permission that they would have no problem with using the existing zoning and allowing four three and four-bedroom flats. It turned out to be a "cash cow". The buyer got it for $2,500 so it was a matter of getting a renovation loan to do the work. 

In case you haven't figured it out yet, all of these scenarios are potential 203k renovation properties.

Posted by

Mike Young, 203k Team Leader    Mike ready for your 203k order

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Comments (8)

Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for the information. I will bookmark this post and read it again.

Oct 05, 2013 10:20 PM
Bill and MaryAnn Wagner
Wagner Real Estate Group - Ocean City, NJ
Jersey Shore and South Jersey Real Estate
Mike, This is really great information. You clearly think outside the box. I never would have thought any of these scenarios would qualify for 203k.
Oct 05, 2013 10:20 PM
Chuck Mixon
The Keyes Company - Cutler Bay, FL
Cutler Bay Specialist, GRI, CDPE, BPOR

Mike - is there no a limit on the amount of repair as a percentage of work?  Some of the ideas you list sounded like that may exceed that percentage of repair.

Oct 05, 2013 10:53 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Mike, I guess the best way to find out is to apply for the loan. You will never know until you ask a knowledgeable 203K expert like your self.

Oct 05, 2013 11:04 PM
Rob Ernst
Certified Structure Inspector - Reno, NV
Reno, NV-775-410-4286 Inspector & Energy Auditor

The other question might be can those repairs be done with in the time limit of the 203K? Some of those are pretty extensive. Doing an addition or remodeling a kitchen would be much easier than repairing a burned structure or converting something to habitable space.

Oct 06, 2013 12:39 AM
Harry F. D'Elia III
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

You will never know until you apply for the loan. Each home is a different project in my opinion.

Oct 06, 2013 12:50 AM
Pat Champion
John Roberts Realty - Eustis, FL
Call the "CHAMPION" for all your real estate needs

Great post this loan is a great way to invest in a property and a tool a buyer can use. Thanks for sharing the possibilities.

Oct 06, 2013 01:23 AM
Mike Young, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Thank you all for stopping by.

Gita, the possibilities are endless

Mike and Mary Ann, Most people don't realize the flexibility of the program, if you come up with a unique scenario you may want to run it by us.

Chuck, That is a common misconception. If you are doing a HomeStyle Renovation loan they do have a percentage as you mention, NOT so with the FHA 203k. You are only held to the maximum loan amount for the county the property is located. Right now in Miami-Dade County your maximum loan amount is $423,750 but that could be all renovation if you owned the property free and clear. Once scenario we had was a property was picked up for back taxes at $2,500 and the renovation was only $125-150,000, the appraised value after improved was over $400,000. I had another client who had a home purchase at $400,000 but it needed $200,000 in improvements... he just had to put a little down. The alternative was to tie all of his money up but this allowed him to put a low interest 30-year fixed rate loan in place up front. No more worries for 30 years.

Micheal S., When you are in your business it doesn't hurt to think out of the box now and then. Feel free to call or email whenever you have a unique situation but most of the time we'll be able to do it.

Rob, yes, you are correct. Time is always a consideration however we get up to six months from close to finish, I can build a home from the ground up in 4 months. There will be times where you need to get an extension on the six months but that can be done too. Most lenders will let you have one extension from 3-5 months depending on the situation. Sometimes it takes two months just to get the permits issued in some cities or counties.  If you are a 203k consultant now or would consider it, I would like to talk to you more about the possibility. We could use you in the Reno - Sparks area.

Harry, you have that right, and that is how we look at each project. One shoe doesn't fit everyone for sure.

Pat, you are so right on target. While renovation loans aren't for everyone, most homes need something, it may be that a renovation loan is just what the Dr ordered. If the roof is marginal, you dont' want to be sued if it should leak a year down the road, have them use the program and even though you aren't liable anyone trying to sue you because a new roof leaked would be hard pressed to win that argument. 

Oct 06, 2013 05:49 AM