Reappraise -> HELOC -> finish basement -> rent??

[Account Closed]

Hello Everybody,

I have a question for y'all. I bought my SFR (bungalow style) here in SLC in Aug '14 with 2 bedrooms and one bath and have an entire unfinished basement that if turned into a studio style apt (bath/bed/small kitchen) could be rented out.

Curious to know what suggestions i might hear about the strategy i'm currently actioning and if there is something i'm missing.

- Find an appraiser in SLC, UT; if anyone has a referral i'd love to hear it and are appraisers dime a dozen or does it make sense to get someone a bit more pricey?

- Once house is appraised, hopefully for an amount that will let me get a home equity line of credit, use said HELOC to finish my basement and rent out ASAP

- if i'm not able to get a HELOC for enough $$ then i need to rethink my strategy

- also, finishing my basement i think will be a ~50K job since there is at least 1-2 feet to be dug out before any work can be done to put in a bath/kitchen

Couple things need to go right for this idea to cash flow adequately but i won't know until i try....the big goal or the immediate goal after that is to potentially buy a triplex that i'd occupy and continue to rent out my initial SFR with that other tenant in the basement.

-Chris

[Marcia Maynard]

We did not require an appraisal to get a HELOC through our credit union. We maintain a $100K HELOC, secured by our primary home (which is paid in full), with a $25 annual service fee. The rate is 3.25% (variable), interest only, and hasn't changed for the last 10 years. We use that money for short term needs and repay it as soon as it is feasible, so it is ready to use again.

Before seeking an appraisal, check with the lender and see if it is necessary. Or shop around for a lender that doesn't require it. How much equity do you currently have in your home? We had 100% equity and no mortgage on our primary home and our credit scores hover around 800, so that worked in our favor. It pays to keep your financial status healthy.

Also, be prepared for what it takes to make your primary home an income property. What are the zoning requirements? What are the building code requirements? How will you handle the additional parking/storage? How will it impact your family and neighbors? How will it affect the resale value? Are you ready to be a landlord and have what it takes?