Newbie's first deal -- advice wanted on how to finance

[Dustin Lee Cotliar]

Hey BP community-

Below I’ve outlined a deal I’ve found in Florida. I love the location, appreciation potential, the property needs work but already as lots of character. And most importantly the numbers just make sense. Its going to be short term renal, e.g. airbnb for 6-8 months/year (peak season) and month-month more traditional rental for 4-6 months a year. I have a broker/investor who would manage it for me. I have a high income regular job so I have access to funds to pay off high interest debt but don’t want to raid my personal funds for the project. I will put down the 10% needed for the loan (~40K).

This is my main question:

1. The house needs 50-80K rehab and will need about 10K for furnishings thereafter— I need to get financing for this. Here is what I considered doing:
1. A) Getting a high interest loan (hard money, signature loan, from a family member) and refinancing at 6 months/or a HELOC. The lender said he would do this. Based on comps I think the house would would be worth at least 600-650K and im buying it for 400-425K. The house needs pretty light rehab (pain, cabinets, landscaping etc)

Is this a bad idea? Any other smart ways I can do this??

Here are the details:

Purchase Price: 400,000-425,000

Single family home with a mother in Law suite in back; as configured now its a 3bed/1bath and a 1bed/bath; Will configure turn the garage into studio w/ bathroom, so essentially will a total of 5 bedrooms and 3 baths (as 3 separate units) after renovation.

Cash needed:

+Down payment: 40 (10%)

+Closing costs: 5000

+Renovation: $50-80K

+Furnishings: $10-20K

**Numbers below are for a price of $415,000, if put 10% DP+ PMI and Using 3.2% interest, 30 year Fixed**

———

Short term rental- 8 months per year

70% of night occupancy typical for area

450-500/night total predicted (3 “units”)

(0.7*30=21 nights full) x 450= $9500.00 revenue per month

(?Maybe even more?- airDNA forecast increasing, >$550/night by 2021)

Short term Rental Fees:

-Property Mgmt (20% of revenue)= $1900.00

-Local tax (13% of revenue) = $1235.00

General fees:

-Mortgage Principal+Int: $1578

-Insurance(monthly): $160

-Property tax(monthly): $317

-PMI: $200

-HOA: $0

-Maintenance: $500/month

-Utilities/electric: $250

-Utilities/grass: $150

-Utilities/water: $100

-Utilities/Internet: $70

-Cap Ex (saving 5% of revenue): $475

-Vacancy (Saving 5% of revenue): $475

——————
Total: $7410

$9500-7410$ = $2090 cash flow/month on average

——

More traditional rental, eg month-to-month: 4 months per year

Rental Income

Unit 1-(3 bd/1ba): $2500/mo

Unit 2- (1 bd/1ba): $1100/mo

Unit 3- (1bd/1ba): $1000/mo

Total: $4600/month

General fees:

-Mortgage Principal: $1578

-Insurance(monthly): $160

-Property Mgmt (10% of revenue)= $460

-Property tax(monthly): $317

-PMI: $200

-HOA: $0

-Maintenance: $500/month

-Cap Ex (saving 2.5% of revenue): $ 122.5

-Vacancy (Saving 2.5% of revenue): $ 122.5

Total: $3460/month

$4600-3460= $1140/month in cashflow on average