Refinance out of a 203k into something investor friendly?

I’m guessing someone has asked this before, so please forgive me :slight_smile: Noob here.

Has anyone used 203k loans to purchase and rehab a property, occupy the property briefly and then refinance into an investor friendly loan so the property may be rented?

Long story short: I’d like to use 203k financing to rehab properties, I would plan to use them as my primary residence for a short amount of time (short as possible to satisfy 203k requirements) and then refinance and move out. I would then rent out the property.


Find fixer-upper
Purchase for $50K
Get a 203k loan for $100K
Use the extra $50K to rehab the property
Move in
Refinance at $100K
Move out
Rent property

I have never done this and I was hoping to get some feedback concerning potential obstacles in doing things this way. Any thoughts/suggestions? Am I a total moron here? :help

There is always a risk and there is always a benefit after.
What you can do is to get someone professionally to help and advice you on what to do with it.

I’m also looking for suggestions as to what type of financing I should refi into. -Thanks

You will have to live in the property for a year to meet FHA 203K criteria. At the end of a year you can do a 203K streamline refi if it makes sense. Unfortunately, you will not likely find a lender that does 100% LTV financing as you wish. Most investor loans are at 70%-75% LTV.


I’m confident the property will be worth $150K after rehab, does that help my situation?

Can I use my equity in place of a down payment for the refi?

Or, if there is a different initial financing option that allows the money for rehab and the low 3.5%-5% down payment, I would definitely be interested in that as well.

If you don’t have alot of money to put down, the 203K program might be your only option. One thing to remember is that not every property will be eligible for the 203K program. You should be talking with an agent and a bank who does 203K’s and get pre-approved.
If the property actually appraises for $150K, that will help you greatly. You need to be really conservative with your estimates. You should under-estimate ARV and income, and over-estimate expenses, repairs, and vacancy allowance.


Thanks JP, I will get the pre-approval done ASAP, it’s been on my to-do list for a while, probably should be a the top :slight_smile:

Any suggestions on what type of financing I should use for the refi?

…besides 203k?

You will not be able to refinance the property for 12mos. No credible lender will touch it because the 203K is an FHA loan and has government restrictions.

I received my 203K Specialist Certification recently and they were very clear on this fact. Because this is financing by a government agency, if your caught refinancing prior to that year you may subject to fraud charges.

Please tread lightly on this subject. The NO INVESTOR moratorium has been in place since 1990 if that helps you understand how serious they are.

It’s better to just stay away from 203K loans as an investor.

All the Best,
David Monroe

Wow, well they don’t like to make it east for new and budding RE investors, do they?

I guess I can wait 12 months if need be, but it would be nice to get it done faster!

If I could find another option that provided a sub 5% down payment and funds for repairs/improvements like a 203k, that would be great!

By the way, thanks dmonroe45, this is good info!