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

[Caleb Brown]

What is the estimate for getting it rent ready? Can you do anything yourself? I would be leery of borrowing more since you already have debt to pay off. 

[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. 

[Cameron Marro]

@Kevin Sobilo wow thank you Kevin your response was incredibly helpful.

[Cameron Marro]

Quote from @Caleb Brown:

What is the estimate for getting it rent ready? Can you do anything yourself? I would be leery of borrowing more since you already have debt to pay off. 

 I have a lot of extra materials from the first renovation. I would say it's going to cost around $15,000-$20,000.

[Samuel Eddinger]

@Cameron Marro - I would work to get her out, move in to the bad unit and rent out the good unit.  I would then work to renovate the bad unit as quickly as possible.  Then you can choose to get a roommate to make extra money.  Whenever possible, try to figure it out without taking on debt.

[Jacob Sherman]

Will be difficult because you currently live in the property . is the 2nd unit livable and just looking to renovate ? 

[Mohammed Rahman]

Hey @Cameron Marro

1. Personal Loan or Line of Credit: If you have decent credit, a personal loan or line of credit could give you access to the cash you need for renovations without using your property as collateral. Rates may still be high, but sometimes they’re more flexible with repayment options than a mortgage refi.
2. Family Loan Structure: Since you have an existing interest-free loan from family, you could talk to them about restructuring or even adding onto it, if they’re open to it. Set clear terms in writing so that it’s “official,” which can protect everyone involved.
3. Renovation Phasing: If the reno is intensive, consider breaking it into phases. Focus on key areas first (like floors, walls, kitchen, or bathroom), which may help you handle the costs more gradually, even if it means moving in furniture or updating fixtures down the line.

Also, since the tenant left it in rough shape, be sure to document all the damage (photos, receipts) in case you decide to pursue reimbursement through their security deposit or in court.

[Henry T.]

I cant imagine where you'd find better than conventional unless you have a crazy friend with a lot of money.   Like Samuel says, Move into the fixer and start making money with the good unit, now.   Zero interest days were an anomaly that I don't think you'll see again. 

[Michael Ohara]

Some great responses here. Love what @Kevin Sobilo replied - sounds like some good wisdom. I have an idea for you, sending a connection request.

[Cameron Marro]

@Mohammed Rahman thank you for your response! I am going to look into a personal loan. Also, did not even think to take pictures once she moves out so I will definitely be doing that. Thanks again