Newly acquired 6 PLEX in AZ. Need Advice!

[Cameron Lam]

Hi guys!

I recently acquired a 6 plex in Mesa, AZ that consists of small studios and 1Bed/2bed units.  The units range from 350-600 sq feet and we are in our inspection period.  The purchase price was $460K and am using a portfolio lender at 15% down and interest only for 10 years, and then amortize the remainder over the last 20 at 5% interest.  The units are bringing in $4300 in gross rents as is but there is HUGE upside in doing updates.

We went in for inspection yesterday and it looks like 3 of the units need at least $20-25K in rehab with another 25K for landscaping. I'm projecting our gross rents to rise to $6000 with $100K in rehab or an increase of $1700 per month or $20,000 per year. Not sure if I'm calculating an ROI correctly here but all else equal...seems like a good idea at a 20,000/100,000 or 20% ROI. ROI might even be higher since our capex costs will decrease per my original model.

Here's my question.  Since my loan is already underway...what's the best way to finance this rehab?  My thought isn't to necessarily do all 3 units and landscaping right away but over time through the next year or two.  I've done some rehab on other properties I own but they were small in the 10-15K total cost that I just used cash I had saved up.

How would you guys finance the repairs? I expect ARV of the property to be $650-$700K. Purchase price of $460K + $100K rehab.