Seeking Renovation Advice for My First Investment Property

[Cameron Marro]

Hi All,

I bought my first 2-family property in CT just under a year ago. I renovated the first floor already (where I currently live), and now that I am evicting my tenant (yippee lol) I am looking to renovate the second floor when she leaves.

I was hoping to do a HELOC, but after looking into it realized my only option is a Conventional Cash out up to 75% Loan to Value. Based on what I currently owe and how high rates are this doesn't seem worth it to me.

Does anyone have any advice on what the best way to do this is? I have quite a bit of debt that I am working on paying off (luckily it was loaned to me by a family member with no interest and no deadline). It is also not an option to not renovate as she came with the house when I purchased it and absolutely trashed the place. 

I appreciate any help!

Thanks

Cam

[Kevin Sobilo]

@Cameron Marro, a few things to think about:

1. Interest rates are NOT high right now. They are pretty "normal". Over the decades, today's interest rates are historically pretty typical. What was ABNORMAL were the interest rates for the previous 10-15 years which were unusually low.

2. Using mortgage debt at 6-7% on a refinance to pay off higher rate debt such as a credit card at 15-25% is a savings!

3. Since part of your property is a rental, I believe a portion of your mortgage interest should be a tax deduction unlike your other debt. That is an additional savings.

4. The old adage is "marry the property, but date the rate" meaning that if in a few years interest rates are lower you can refinance again into that rate.

5. If you have this debt and need money, you may not be preparing yourself for the challenges of being a landlord. You are dealing with your first eviction/rehab but if that happens again in 6 months and it takes months to evict will that financially stress you? A cash-out refi could allow you to set aside some funds as a reserve or at least pay down your debts so that your lines of credit (credit cards etc) can act as your emergency reserve when more bad things happen.