Good deal? - STR - Austin, TX - Duplex

[M T Naughton]

Hello,

I hope everyone is well! I'm about to close on a duplex in Austin, TX. I currently own one and sadly the cost of homes has gone up so much that doing it the traditional way no longer cash flows. As such, I'm considering an STR Airbnb strategy. I was wondering if you would mind reviewing my numbers to see if they made sense or if I'm missing something.

About the Asset:
Purchase price: 1.238M

Loan: 10% down with a 3.65% interest rate. My downpayment and closing costs will be $138,878

Location: 1.5 miles from Downtown Austin in "A" Neighborhood - House is on the side of a freeway but there is a wall barrier

Sq Ft: 4400

Beds/Baths: 9 beds / 9.5 baths

Kitchen: 1 kitchen - I need to remodel it and build another kitchen for unit B

Living room: Non-existent - I plan on sacrificing a bedroom and knocking down some walls to make space for 2 common areas
Zoning: Zoned as a duplex but currently a single-family home (not up to code)

Year built: 1981

History: Inspector says the house was "overbuilt" - The structure is very solid with no signs of damage. The home was initially a duplex for a father and his adult daughter - The daughter then turned the home into a Bed and Breakfast - Currently being rented out room by room ($1,000/per room but not all rooms are rented at this time)

Repairs: Needs a new central AC and heating system - Roof is 14 years old - new kitchen - updated kitchen - two common areas - Mold remediation

Numbers: *Here are the different options I am exploring (see what they are below)
- Scenario 1: Cash-out refi + Airbnb both sides of duplex. The house is currently under market. Comps suggest the actual value is ~$1.7m. I am paying $1.238m
*** In Austin, you can only rent out a home on Airbnb if you live in (aka owner-occupied). According to the folks in the Austin Airbnb Hosts Facebook group as long as the county has the home listed as my homestead, they wouldn't have any way of knowing that I'm renting out two sides vs one but scenarios 3 and 4 are 100% legal and, as such, can serve as backup plans

- Scenario 2: Airbnb both sides of duplex (no cash-out refi)

- Scenario 3: Duplex 1/2 rented out to family (traditional) and 1/2 Airbnb

- Scenario 4: Regular good old duplex

Note: Data from airdna.co (Airbnb) and rental comps

Anything I'm overlooking? 

Thank you, 

Matt