Combine my love of teaching with REI Brattleboro, VT
I want to combine my love of teaching and my love for Real Estate. I want to teach students how to House hack to flip/Rent when they are Juniors, Partner them with Professionals Senior year, and then mentor them through a house hack post H.S.
I was planning to use the FHA 203K loan for Acquisition with Exit strategy for flip or Rent and Refinance.
Is this a viable or best strategy to use?
Hi Josh,
FHA 203K loans are typically limited to primary residences. Are you planning to stay in the property during/after this process? If not, you'd need to look at a different program. If you are planning to stay in the property, this could be a viable strategy.
The Students would be living in the property through the house hack.
You didn't mention it directly above but I'm assuming you are planning on doing a 'live-in flip" in which case, yes, you should be able to get an FHA 203K loan (assuming you meet other FHA lending requirements). Remember, FHA loans, whether standard or 203(k) are only given to borrowers that intend to make the property they are buying their primary residence. I have never used an FHA 203(k) loan myself, but several years back when I used to do mortgages, I did sell a few of these to my clients. Even though they are a great tool to use to fix your primary residence, they are not that easy to obtain. They can get complicated pretty fast. A few things to keep in mind when obtaining an FHA 203(k) loan:
1) Improvements paid for with a 203(k) loan must generally be completed by a licensed contractor and are subject to approval by an FHA appraiser as well as oversight by the FHA-approved consultant if it's the standard loan option.
2) You must develop a remodeling plan, schedule, timeline and put it in phases. A GC can help you with this.
3) You won't get money for the next phase until the previous phase is completed. An FHA-approved inspector will go to the property to ensure each phase is completed before you get the money.
4) The renovations/remodeling must start within 30 days of closing and be completed within six months. There are a few exceptions to this rule, but this may not work with your plan on help the students during their Junior and Senior years
5) Because a lot of specific paperwork and protocols go along with an FHA 203(k) renovation, you will want to find a contractor with experience working on this kind of project.
In short, these FHA 203K loans sound like a great idea, but they are very nuanced. <--This is what I remember from my days when I did mortgages. I hope these 203K loans have gotten easier now ( I doubt it) but I would speak with a mortgage lender that has experience doing these loans. Hopefully, things have changed for the better.
For what you want to do, which I think is very honorable thing to do, I would suggest you take a different route. I would suggest you pair up or find GC's throughout your area and ask if they would be willing to teach your students the fine art of house flipping. You can also pair up with Roofers, Plumbers, Electricians and have your students shadow them around so that they learn the fine arts of renovating/remodeling. You can later find investors in your area, pair up with them and have your students observe how deals are put together. I wish you the best of luck!