Matt Porcaro
Appearances
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So there's a couple of different loan products that exist and they have different requirements. FHA is the stricter one. Sure. Fannie Mae has a product called the homestyle. I'm actually doing it on my own home right now. So I practice what I preach, man. We use a homestyle loan. We're renovating our own house. That's another example. We picked it up for six fifteen.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
We're putting about two, three, two, three hundred into it. But it's going to be worth like one three when we're done. So we're building almost a half a million in equity.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Great question, great question. FHA, the 203k FHA is a little more strict. They're not really that strict. really just has to be integral to the house itself. So it needs to be, you know, you could renovate, you could get nice finishes, you could get like... So I could have a pool and I could redo a pool. You could redo a pool. Add the pool.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Now, the homestyle loan, which is Fannie Mae's product, which is the conventional product, is a lot more flexible. You can build a pool, a pool house, a basketball court, whatever. It kind of just gives you carte blanche. Now, they will... So obviously, there's the loan limit. But what they really look at for your average buyer is they look at what the ARV of the property is going to be.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And they give you up to 100% of that on the home style. On the FHA 203k, this is pretty wild. They'll finance 110% of the ARV. So they'll actually let you over leverage it by 10%. Obviously not something I am a big fan of as a real estate investor.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Yeah, you do, but I think the reason that FHA probably does it is because, again, they know that you're renovating it for your own home, and they probably, again, it's the owner occupancy, so they're assuming you're going to be there for a little while, so if you're willing to over-leverage it. If you're there in 10 years, the appreciation is going to make up for it and you'll be fine.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So I just, I dedicated when I first started this, I said, I want to make sure that I have all the information out there about this that I never had. So.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
We can't trip and fall into a house anymore like we could, like society could 60 years ago, right? Or in 2005. Yeah, right.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And to that point, Ray, like, you talk about, like, the assets versus liabilities, and there's that, like, common thing that Robert Kiyosaki said is, like, you know, your own home is a liability. It's not an asset. It's other homes that become assets. Your rental properties are assets.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
But your own home is a liability because typically for most people, their own home is they go in and they spend a ton of money to, you know, maintain it and landscape it and repair it and, like, Over the course of 30 years, it's not a true investment. You're not making money on it. Now, like appreciation will go up.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
But again, I think his point is when you add up all the expenses and you add up like the interest that you pay over it on 30 years, you ever look at it. You know what? Obviously, a truth in lending statement is right. So when you when you take out a 30 year mortgage on a five hundred thousand dollar property over the course of 30 years, you're actually paying over double. of that 500 grand.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So in what universe is that a good investment? Right. You paid a million dollars to make 500,000. Right. Right. Now, of course it'll appreciate a little bit, but okay, maybe you break even with this method with building, you know, again, it's, it's value add investing, right? It's the BRRRR strategy.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
It's a way to force yourself into some equity and basically just like press the fast forward button on the process. And that gives you that leverage and that creates it into a true, a true investment.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Um, you know, really the long and short of it was that I was trying to get into real estate investing for a very long time in New York, really high cost of living, really expensive market. And, uh, I read rich dad, poor dad, which I called taking the red pill because, you know, I grew up in an environment working class.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Now, to make things even better, again, you can buy a multifamily or even now, just as of like really last year, they're letting you forecast the future rental income or letting you use the rental income of accessory units. Like down here in Miami, they have like casitas, like little mother-in-law suites, right? Typically, they wouldn't use that rental income to qualify you.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So you're able to take that rental income and really offset your mortgage or if not cover it all in these higher cost of living areas, right? And one cool thing to know is that for every $1,500 in rent that you'd be getting from either, you know, there's ADUs, accessory dwelling units, which are becoming huge right now because there's such a lack of housing in the U.S. right now.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
ADUs are sweeping across the nation. So if you're saying to yourself, oh, I can't buy a multifamily. I live in an area that's only in single family homes. Well, you could just plop down a casino. I mean, you could even buy one of those like Amazon houses, those pre-built prefab houses and drop it in your backyard. The 203k will finance that.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Yeah, yeah. So, like, you could buy a prefab house. Obviously, you have to, like, you know, finish it and do some, like, stuff inside. But, like, it's a pre-built structure that you drop in your backyard as long as your zoning allows it. You can get the rental income from that, qualify yourself for more. Again, now that's a true investment. You're making money off your own home.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And that's an investment. And that's where you're basically beating the system. When I say like the American dream's new, like this is the new American dream, right? When my family came over from, you know, like Italy and, you know, from, you know, from Ireland, right? And they moved to New York City, they all house hacked.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
It was called like, this is how we're going to afford to live in New York City. They had multifamily properties. They lived in these tenements. They all pitched in. One of them in the family was the lucky one that had the note and they took all and they all combined their rent together. That was how people that immigrants came over to the United States. That's how they were able to afford it.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And that's how a lot of people do it. You see it. You still see it to this day. Immigrant families come in and they share housing. House hacking is like the most American thing you could do.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You know, my parents told me to go to college, get a degree and go work nine to five.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
they had their own business so like that actually like a like a consistent paycheck every month was that was what they wanted right the grass is always greener type of thing so i did that and i did it and jumped into it and then realized immediately that this is not what i like or enjoy and then also realized that that's also not how people get rich yeah so when i read rich dad poor dad i read about real estate and i thought real estate sounds amazing but in new york i was like i don't think i could buy my own house let alone multiple houses yeah
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And just with like anything else, like you said, it takes effort. Now, you know, what's the quote? Like to the victor gets the spoils or whatever it is. Like, listen, you like you're not going to get something for nothing. Right. Do you live in the home? Like while it's being renovated? No. So you don't have to actually like physically occupy it. So what happened in my case, right?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You know, I bought the property. It was an eight month renovation. So the requirement is you have to be you have to intend to be there as your primary residence for a year after the closing date. So what happened was the renovation took me eight months. Now, in my position, I was lucky enough. I was able to live with my family at the time.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So I didn't have I didn't have to pay for to like a mortgage and rent at the same time. However, they have it built into the loan because they know living with their family. Yeah. But but one of the cool things and one of the cool features is like they understand that you might be paying housing for another place while this is being renovated. So they give you the option to wrap up to now.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
They just changed up to nine months of the mortgage into nine of your mortgage payments into the loan. So now you don't you could buy the property, not pay out of pocket for it while it's being renovated.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And the coolest thing about it is, again, just very recent. So here's the thing, right? Obviously, we know what's going on with the market, right? Everything's changing. Everything's getting more and more expensive. It's getting harder and harder for millennials to buy a house, let alone renovate it.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
um we saw it was all in the news like there was a big downturn in the in the amount of mortgages being endorsed right it was like an all-time low or the lowest in 18 years whatever it was right people were just not buying homes yeah they thought that jacking the interest rates they thought would you know help it but it didn't actually people were just like well we can't afford anything and sellers like we can't go anywhere right so it it did the opposite like you know value stayed up so fha and fannie mae
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
even though they're government-backed entities, they're still entities and they still need to make money. And what happened was that they had to go back to the drawing board and be like, well, how else are we going to continue to make these programs more feasible, more attractive? Because we got to do something because we're not bringing in any business. We have no mortgages being endorsed.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So they made a lot of changes recently. Number one being that Fannie Mae, typically FHA was the only product that you could buy up to a four-unit property with only 3.5% down or a low down payment if you own or occupy it, right? With Fannie Mae, you could buy a quadplex, but you would have to put 25% down, even if you lived there.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Fannie Mae changed it where now you can buy up to a four-unit property for only 5% down. And one of the big issues people were finding with FHA, we were just talking about it with one of the guys over here about the self-sufficiency test, right? FHA has this thing where like, if the property doesn't pay, it makes sense. I mean, it's common sense.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
But FHA had this test where if the other three units, if you're living in a quadplex, if the other three units couldn't cover at least 75% of the mortgage, They wouldn't give you the loan. And it knocked down a lot of people's opportunities to buy quadplexes. It also exists with triplexes. Same kind of deal. Fannie Mae stepped into the mix. They don't have that same requirement.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So as long as your income can do it and you're able to factor in that future rental income, you can do this now. And then Fannie Mae, unlike FHA, Fannie Mae allows you to repeat the process. They allow you to have up to 11 of these in your name at any given time, where FHA only allowed one. What? So I can have 11 of these? Yes. Including your primary.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
As long as you follow the guidelines on what you're doing, you have something that's going to cover the debt on the previous property and you qualify income wise and you're moving in earnest into the next property. Absolutely. Sanity to me. Yeah. And 5% down every time.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So the 203k and finding out about this was a culmination of me kind of researching and finding my way to break into the game for such a long time. And I really almost found it out by accident, but it's ultimately will leverage me into the game with very little out of pocket, but created, you know, six figures of equity and net worth on my first deal.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
When I built this, all I wanted to do was, you know, I got done with that first deal. And I just remember sitting in that property, being done with the renovation, smelling the paint on the walls, smelling the new floors, like looking around and just being like, how the hell? do not more people know about this? Right. Why did this take me so long to even know it existed?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And mind you, like my, it wasn't a walk in the park for me because I didn't have someone like me that knew about it to walk me through it. I kind of had to just figure it out on my own, which I'm glad I did. Right. Cause it taught me so much about it. Um, so when I created my whole platform, the two or three K way, I just wanted to let everybody know about it.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So my Instagram, um, you know, my YouTube, I have all the information you could ever want or know step by step. Um, you know, obviously people are like, okay, listen, I get it, Matt. I understand it. I want to do it, but I just want to do it and get it right the first time. Make sure I slam dunk it. So I do work with people, right? One-on-one and I coach people through it. And.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
you know, guarantee that we walk you through the process to get you six figures of equity, get you cash flowing day one, right? Using this strategy. So you could go to the 203kway.com slash apply to apply to work with me. It's not for everybody. You just have to make sure that you're the right fit for us to work together. But that's an option as well.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So when, I mean, I just want to not be totally selfish with the questions I want to ask. Keep doing it. I always say like the questions that you have are probably the questions that everyone else has on this. Not many people know about it. And that's kind of the benefit I have going on podcasts and stuff like this is like, you know, people are like, oh, what do you want to talk about?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
I'm like, you're interested in it. Just ask. Because there's so much to know and there's so much I could tell. But the questions that are obvious to you are probably what everyone else is thinking of.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
It's the same as FHA. It's an FHA loan. Now, there's a lot of lenders out there that don't do this. Or they'll claim to do it or they'll say don't do it.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
The first thing to do is work with a lender that knows how to do these. Now, luckily, over the years, I've been able to build relationships with lenders that do this. They do it nationally. I call them my preferred lender partners. I'm not a loan officer. I'm not a real estate agent. I'm just a... big fan and proponent of this process. You're a spokesperson. I am. I really am.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
I'm like the unofficial 203k influencer.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
I don't need to be on any government payrolls. But I've been able to build that. And for every lender out there that will tell you, oh, it's too much of a pain. I always make the analogy, if you have a Porsche, and you have to get the oil changed or something, your tires rotated, you don't bring it to a Honda dealership. Now the Honda mechanic could probably do it, but why would you?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
He's going to fumble over it. He's going to make mistakes. He's going to really just give you a problem with your asset. The 203kway.com slash lender. You go there, fill out a quick form, say what market you're in, what you're, you know, a little couple other questions. We'll put you in contact with a lender that's in your market that specializes in these loans and does them day in, day out.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You know, one of the cool things too is like you could wrap in like damn near all your closing costs. Like all my students, all the people I work with, like when I say three and a half percent down, I get three and a half percent down. So Anyone that's quick with math, right? When I said $9,500 on a $350,000 loan, that was my first deal.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Yeah. So the FHA 203k loan is an FHA loan. So if anyone's familiar with the FHA loan, it's, you know, it's a government backed loan product that, you know, allows people that are just starting out to buy a house with very little out of pocket, right? Three and a half percent. The 203k version is a version that allows you to wrap renovation costs into the mortgage.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Anyone that does math and is like, you know, not one of me, but people that are quick with math, they'll be like, well, that's actually like 2.5% or 2.7%. How'd you, what's that? I got a full 6% seller's concession back at closing. So you could get 6% back at closing month with FHA of the purchase price. My 6% seller's concession overpaid my closing costs. So I got a check back at closing.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
I was actually supposed to lay out like another couple grand. Instead, that money came back to me. So my net out was $9,500. Because you're able, again, when you find a good deal, you do all this stuff. You could wrap in all your closing costs.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
process like i've done this 16 years i'm still going to call you and say hey dude i think i'm going to do this thing yeah help me make sure i'm buying the right type of home i'm getting the credits i need that i'm getting them max the tenants and the foundations of real estate investing are the same but it's the nuance of the loan itself and how it operates is where i come in and specialize in because i know how to pull every lever in the process right i've helped hundreds of people do this and like i know where to push the button where to pull to get the most keep as much money in your pocket as possible where to
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
where to leverage and pull the most out. The other cool thing, like we're talking about finding a good deal, and that's obviously the most important part of any real estate investing endeavor, right?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
The coolest thing about this is because you're putting so little out of pocket, because you're paying such a lower interest rate than a typical investor using like a DSCR loan or something like that or an end buyer, The deals pencil out easier. Yeah. Like, you know, I call it the Goldilocks zone.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You're basically playing in this in this in this part of the market where like you can you can afford more than like a flipper or a wholesaler. But you're not playing with the retail buyers because retail buyers are looking for move and ready stuff that's going to pass inspection. Right. You can go on the MLS and everything that's in as is condition and stuff.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
They say like cash only like you can purchase all of that. Yeah. Really, the only thing with the condition is it needs to be some existing structure of some kind. There's no such thing as too messed up of a property. There's also no such thing as too nice of a property. You could get a house that's moving ready, totally financeable.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
But if you want to renovate the kitchens and bathrooms, and as long as the loan to value works out, you could do that too.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
making them look better because they're just wow or they didn't do anything to it yeah i mean you could do all that and then fannie mae also mind you has two other products that you don't have to occupy the property fannie mae home style loan you can get a 10 down second home loan so as long as you live there some portion of the year follows like the second home standards right you have to live i don't know what the exact number is yeah you could buy it and renovate it with only 10 down
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So it was meant to kind of get the zombie homes off the street and give people the ability to not only buy a house, but renovate it and fix it up and make it the way they want. One of the cool things about it is that it also allows you to buy up to a four unit house. property, so you can buy a multifamily property. And this is really big with the house hacking community, right? Yeah.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And then they have an investment product where you can go and buy another property, only put 15% down, but they give you the purchase price plus the renovation.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You're paying points up front, stuff like that.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
No, you don't have to pay out of pocket for your contractor. The check goes directly to the contractor.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
What's the what's like the average appreciation rate right now in the U.S.? Do you know what it is? I think it's like somewhere around five or six percent.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So think about this. If you renovate your house. You're the new top of market. No matter where you are in the country, you renovate it. You are the new comp. You are in the new standard. So you're already at the top of the market. So that alone, when you get your appraisal, you're going to get a bump because your new finishes, you're brand new.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So right off the cuff, let's just say on the low end, you're making 10% of equity. If you don't even plan to be a real estate investor, you're just setting the comp, right? Now, you also appreciate it 5% a year. Let's call it 5%, 5%, 6%, right? You doubled your down payment. By the time you're done with your renovation, like I have a guy that's doing a big renovation right now.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
It took him a long time, a year and a half. It's a million plus dollar property. Big renovation. His equity has gone up like $100,000 in the time it's taken him to renovate the property. He's not even in it yet. And he's already made a respectable year's salary in equity just by owning it off of, I mean, this was a million dollar property. He only put 35 grand down, three and a half percent.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So he is so wild. Yeah. Yeah. Triplex in New York. And it's again, so like you're you can't I say like this is not an FTC thing to say, but like literally like every person I've worked with, like never loses. You're putting so little down. If you follow my strategy and you work with the right people, obviously, that, like, know what they're doing, it's, you can't lose on it.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So obviously, housing costs are the number one cost for anybody, right? Like your rent or your mortgage payment is usually the biggest cost. So house hacking has become very popular where you rent out portions of your house to cover your mortgage. Or if you're, you know, you really get a good deal, pay for more N plus cashflow while you're living in the property.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
It's three and a half percent. It appreciates way faster.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So the two Oh three K really just pours gasoline on that, on the house hacking method, because not only are you able to buy a multifamily property, but you're also able to fix it up, build, you know, some equity into the deal, which is what I did. Um, and take that equity to go repeat the process, take that money back out and go buy more multifamily real estate.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
It's like the Burr method and house hacking. In your own home. In your own home with only 3.5% down.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So when you talk about, like, return, right? So to put it into perspective, on my first house, I bought a crack house duplex in New York, okay?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Yeah, it's a real story. It was literally a crack house. You know, nobody wanted to touch it with a 10-foot pole, but I... It was kind of the only thing I could afford, even in the New York market. I still had to scrape the bottom of the barrel. And I was using the bank's money, and it was very low risk for me. I only had to put $9,500 down on this two-family, right?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You had $10,000. Let's call it $10,000.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You're using other people's money, which is real estate investing 101, right? And in addition to, like you said, buy the ugliest house on the nicest block. And most of the thing, like when you're a real estate investor, you're just starting out, right? You're looking, you're watching the TV shows and- HGTV and you're like, you want to flip a house, whatever.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And you look at a house and you're like, oh, all right, well, I have to purchase it. I have to put 20, 25% down. And then I have to come out. Then I have to finance the renovation portion of in there looking at hundreds of thousands of dollars. And that was what I was struggling with. I was like, how the hell does anybody do this? You know, I was 20 something years old. Yeah. Like I had, you know,
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
again, 10, 15 grand, that was it. And that took me a long time to save up, right? That was like the most money I had ever had in my bank account. So, you know, when you look at ROI and using the bank's money, remember, this is a government backed loan product and this is a way to launch you into the game. Now, you know, we could talk more about like how to repeat it and kind of stuff like that.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
But ultimately what it did for me was it just leveraged me in really quickly because off of that 9,500 bucks, again, we'll call it 10 grand, the 10 grand, In the first year, I built $150,000 in equity into the property. And then I rented out both units after I moved out a year later. And it's still, to this day, cash flows me like $2,000 a month, $2,500 a month.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So when you look at like, when you say like you look at, you know, for example, if you're looking for a deal, right? You're like, I want to make a 12% cash on cash return, right? That's a respectable deal. Return, right? On a property, right? My cash on cash return with that 203k property was like 600%.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
It's not even the same universe.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So there's a trade-off with everything, obviously, right? The reason they're giving you the very low down payment, the reason they're giving you the lowest possible interest rate that you can get at whatever it is at the moment that you get it,
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
is because owner occupancy to a bank is the most stable you know you know stable asset class right so but you're able to do this to leverage yourself into the game and and it's not a first-time home buyer loan like if you're really you're saying like with your friends if they're willing to go move into another property it just is owner occupancy it's not exactly first-time home buyer now obviously you know it works well for that it's um you know it's also for the person that
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
already has like a consistent income, right? Nine to five person, someone that's already working that maybe wants to escape it kind of like I did. This is your way into it with very little out of pocket and then reap the benefits very quickly. Because what I did was once I had that equity, not to mention the equity, but also the experience of doing it, the track record.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
I was able to show my deal to private money lenders and to agents and be like, wow, this guy's a player.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Yeah, that's big. I talk about that a lot. And I don't think people realize what that means. When you build, when you increase your network worth $200,000,
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
know people are struggling like oh i can't find good financing for these when you go to the bank and the bank runs your numbers and they they see what you have on your asset you know on your asset schedule and they see that you have like hundreds of thousands of dollars in equity they know that you're good for it fact that if they really had to like come down on you you got some assets so they're more willing to be more flexible with you so one of the biggest things that i was so surprised about when i got that first deal was how much one deal
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
changes your opportunity, changes how people talk to you. Like I was, you know, I'm electrical engineer by trade. Like you go to a party, you talk to people like, oh, what do you do for work? You know, I'm an accountant, I'm an electrical engineer. You go to a party, and then you talk to people, and you're like, oh, what do you do? They're like, oh, I invest in real estate.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Yes. Yep. Real estate's best kept secret, as I always call it.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
You immediately become the most interesting person in the room. Now, someone watching this might not want that, but it's just a crazy thing to think about, that the opportunity that comes your way, and it only took one. I remember thinking, oh, I only did one. I'm nobody. Sure. But that one, the distance between someone that's never done it to someone that has,
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
is massive, so when you do that, you've accomplished yourself, you've proven yourself that you can do it, and then you just ride that wave and that momentum, and that was the beauty of this.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
The guidelines are very black and white. I mean, you know, at the end of the day, to answer a bunch of the questions, right? First off, it is based off of national and local loan limits for Fannie Mae FHA, right? So those you can Google, you look up FHA loan limits or Fannie Mae loan limits in Scottsdale or in Arizona, wherever you are looking to move, and you'll see that they're there.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So the whole platform, I built everything on Instagram, but the 203kway.com, you know, there's more information on there. about how I do things, how I help people.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Now you'll be surprised, often people are very surprised that it's a lot higher than you think.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
for example you know in in where i'm at in new york a single family home the fha loan limit i think is like 1.4 million or something right now so respect so there is a there is a baseline obviously you're looking you're looking at some some sweet pads yeah but remember that's the loan limit now what's not to say that you you being a great deal finder yourself you find a deal that you know the arv is going to be 2.4 but you picked it up for 1.4 or one or a hundred
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
Or I mean, a million and you're putting 400 grand into it, it's going to be worth two and change.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
And so long as you qualify for it is the big thing too. And then again, if you're going into the new residence, they're going to ask you and you plan to keep your Miami residence, they're just going to say, okay, what are you doing with the Miami residence?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
are you renting it out what are you like if you're if you're covering or if you could afford both that's that's doable too it is a dock loan right so they are looking at your income sure and your debts and what that dti ratio is they look at a 50 percent debt to income ratio. That's really what they judge you off of. So that's your maximum, right?
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
I have a whole community that I built really to help people with this because I had no information when I got into this about this loan product and really how to use it specifically as a real estate investor, specifically to get into the game. But yeah, the 203kway.com. Or even your Instagram. What's your Instagram? At the 203kway. There you go. YouTube Matt Porcaro, but the 203kway as well.
The Science of Flipping
The Power of an FHA 203K Loan [REPOST] | Matt Porcaro
So whatever your income is versus your debts, you want to be, your gross income needs to be 50%.