How to finance a Fix-and-Hold Duplex Househack?

[Josh Benjamin]

I’m about to get in contract ($1.351M) on a duplex in Oakland. It needs additional ~200K in reno to unlock $5200 income. I would live in a unit as primary residence.

Talking to lenders about Hard Money to get title. 9-10% non-deductible interest during construction time without the rental income really stings, and is compounded by risk of higher rates for refi at completion of the work.

Seems like I should either:

  a) plan to race to get plans ready for a Construction-to-Permanent in order lock in a rate ASAP.

  b) race to do basic fixes to make unit livable, move in, and refinance.

Benefit to option (b) is finding a tenant willing to put up with construction for a while. Two concerns with it:

1. not sure if I can expect to be able to refinance with 80-75% LTV on the after-repair value

  2. inefficiencies likely to arise replacing plaster with insulation+drywall and installing super basic kitchen, when ultimate plan is to replace floors and put in a nice kitchen. The unit needs to transition galvanized to copper.

Thoughts on these? Are there other strategies that might be better?