There are a lot of ways you can use the FHA 203k and Homestyle rehab and renovation loans if you are buying a home in the CHicago area. This video goes over some of the uses, including how you can buy a 2-4 unit apartment building, use the renovations to increase the rents, which will add more value.
Loan Depot Interview Between Peter thompson and Milton Minolas on what property types are eligible for FHA 203k and Homestyle Renovation and rehab loans in the Chicago area
Pete: Hi. This is Pete Thompson your Chicago area mortgage guy, and I am here with Milton Manolas, our national renovation expert. Today we’re going to talk a little bit about property types. When most people think of renovation loans, they’re thinking of houses that are falling down, but it’s not just single family homes that you can do with this and it’s obviously not just homes that are falling down. Renovation loans can be used for a lot of different uses, so Milton, what other types of properties can you do a renovation loan with?
Milton: We had a lot of questions Pete, about you know if these loans will work just for single family family homes. The answer is, No. I mean you can rehab a condo or townhome, you can rehab a multi-unit property or two to four unit building. So, really, it’s pretty much wide open on the property type.
Pete: So townhomes condos, one to four unit properties. One thing on condos, it’s because if you are planning on doing this as FHA, the condo has to be FHA approved. It has to have already gone through the approval process and not every complex is going to be FHA approved. In fact most won’t be. But you can use the Homestyle conventional renovation loans with those.
Milton: That is correct. And you can do conventional loan. Of course, the work is going to be limited to the inside of the condo. And quite often we have forwards who update their kitchens, who add appliances and they want updated painting and carpeting and such. And it works out quite well because they don’t really have to worry about the outside.
Pete: Make sense.
Pete: Tremendously! Great!
And, so again you’re looking at you said one to four units building so if you’re going to be buying a multi-level multi-unit type of building that means that you can occupy one space and have your renters basically helping with the rent and renovate the property at the same time.
Milton: This is a gem, because we will finance the rehab in the improvement of all units. So if somebody is buying a multi-unit property say its four units.
Milton: They’re going to live in one of the units, but we are going to rehab all four units. And so what happens is obviously they’re renting out the other three that have recently been updated and could potentially you know demand higher rental income. And, like you say, help them offset the mortgage payment build equity doing it.
Pete: And being that if you’re buying for example a three or four units and those are selling based on the amount of rent that you’re generating, so if you’re able to increase the rent you’re increasing the value of the property.
Milton: There’s a lot more opportunity in those multi units Peter, because there’s fewer cash buyers for them and what we’ve seen is a lot of those type of buildings have interest literally. You know the lot of the tenants have treated them poorly and they’re in need of repair and such, you know there’s fewer cash buyers at those at those price points. And so there is an opportunity for those homeowners.
Pete: And again if you’re looking at three or four unit for example, you can do FHA 3½ percent down.
Milton: That is correct.
Pete: Fix the property, increase the rents, increase the value.
Milton: That’s correct.
Pete: Wow! That is an amazing thing. I mean it’s again it’s something we do on a regular basis. And I’ve always been amazed at this opportunity and it’s a great thing to do.
Pete: So if you have any questions at all about property types in general, if you have any questions about how the renovation process works, please give me a call. Again Pete Thompson the Chicago area mortgage guy and thank you again Milton, and give us a call and we’ll see you soon.