It’s no secret that using the FHA 203k Loan is my favorite renovation tool. Using this loan empowered me to purchase and renovate an old home in Philadelphia and turn it into my dream home. Not only was I able to live in a spectacular new property, but after years living in it I made a decent chunk of change when I sold it.
When I purchased this home in 2017 the neighborhood of Brewerytown had just started really picking up steam. Its just north of the bustling Fairmount neighborhood and purchase prices on properties and land were below 100k. The main commercial strip, Girard Avenue, was pretty developed with coffee shops, gyms, restaurants, and office spaces while the surrounding community was filling in with developer single family homes and multi family units.
Across the street from my property three brand new triplexes had just been built, next door was a full gut renovation, and around the corner another multifamily home was under construction. The evidence was clear that this neighborhood was a safe place for my investment.
I looked for months for a house that was large enough to do what I wanted. I was careful it would allow for a master bedroom with a master bath, a sizable guest bedroom, a powder room on the first floor, and a basement. Usually to get this kind of space you’re looking for something at least 14′ wide and over 1,000 SF.
This house was 14′ wide and 1,350 SF. I put an offer in and after competing with a few local developers, my bid won. I was able to offer a little more (since my holding period as longer this wasn’t a big deal) and since I was going to be living there, the sellers felt more comfortable with me rather than a fix n flipper.
The FHA 203K loan lets you put down 3.5%. I was able to finance some of my closing costs as well as get a sellers assist to help offset my out of pocket expenses. I ultimately put down less than 15k on the purchase. My mortgage covered all the renovation costs, so the renovations were financed over a 30 year loan. You can read about the extensive renovation here.
Throughout the 2 years living there I continued to make minor renovations like a fireplace update, stairway painting, and this hanging pot herb garden. I was really careful when making any updates or changes to the property, as I knew when I put it up for sale then it had to appeal to a buyer. You can read more about that in this post.
By 2020, the property value increased by 45%. Now, it would be really difficult to buy a house for the same price I got mine at. By waiting a couple years, I let my property value increase and subsequently my equity increase and I also avoided having to pay capital gains taxes on the profits.
I walked away with over 275% return on my initial investment, excluding interest payed through the mortgage.