First Rental Property

[Ryan Treacy]

Hi everyone,
Writing in to get some advice on how to proceed with my first rental property. I purchased the property in mid-April and I’ll be done with the renovation after this weekend. I don’t believe that I got the best deal on the property, but proceeded with the purchase as I felt I was falling into analysis paralysis. I am an architect and used to work in construction. I have a lot of experience on the design and construction side, but I lack experience on the finance side.

I made several errors up front:

• I overpaid for the property
• I underestimated the renovation cost (uncovered several high cost necessary repairs)
• I didn’t (and still don’t) have a clear strategy for how I can refinance to pull some of my personal capital out of the property.
• Overestimated rental income

Some positives with this property and experience:

• I learned a ton during this process that I would have never learned in a course or reading a book
• Appreciation: The neighborhood seems to be up and coming. There are several renovations on my block in process and recently completed. There is a new build across the street.
• Forced Appreciation: I added a full en-suite bathroom during the renovation
• Forced appreciation: upgraded the finishes throughout the house

Supporting information:

• Purchase price: $115,000, 25% down, 7.25% conventional loan
• Bank Appraisal: $135,000 (before bathroom addition, renovation)
• Renovation: $30,000 (currently have $10k of that on a 0% credit card)
• Rent: ~$1,400 (originally estimated $1,700)
• I transferred the property into an LLC
• I am not interested in selling the property as I think the neighborhood will continue to appreciate. I also think I would lose money on the property if I were to sell now.

My questions for the group:

1. Have you been in a similar situation with a property? How did you proceed?
2. What are my options to refinance the property?