Critique My Bay Area Primary Residence Rehab Idea

[Steve Wang]

Hi Everyone!

I've been busy with my real estate investing :) I've purchased two properties in Phoenix, one cash flowing $400 and the other $300! Super happy with those so far (If you have any questions on them feel free to ask)!

So I currently live in a duplex that I rehabbed myself, but am now looking to purchase that forever home.

Goal: To have a forever home, and a garage (sadly my duplex in Oakland doesn't have parking) that's customized to our taste in a good school district. Bonuses for potential for an ADU add on if the lot's big enough. Airbnb's seem pretty lucrative in that area since there's a lot of companies out there.

So here's my "idea". I'm thinking about finding a wholesaler that has off market deal properties that was built in 1980+ in Dublin, Pleasanton, or San Ramon for about $900k-$1m (3 bed 2 bath, hopefully 1500 sqft with potential to add more). Hopefully the property can be found for cheap because of some intense rehabbing. Then finding a hard money lender to finance the purchase + rehab costs (I haven't worked with hard money lenders, but I hear it's about 20% down + 10% of rehab costs, so roughly $180k + $25k = $205k). 

I'd then follow my rehab using partially a GC, partially myself. Probably redoing all flooring, kitchen, bathrooms, paint, and then landscaping. To save some costs, I could do an Ikea kitchen with Semihandmade doors, and then figure out the bathroom remodel pieces as I go. 

After the remodel, I'd refinance the property through traditional financing. I'd think that area could appraise for $1.3-$1.4m based on comps that I've seen. I'm okay with leaving money in the property since this would be a primary, but the main point would be to have some forced appreciation, a custom home, and hopefully a lower monthly payment because of the forced appreciation.

I'd love to get anyone's thoughts on this idea. Poke as many holes as you can. All comments/constructive criticisms are welcome haha :) Also if anyone knows of some solid wholesalers in the Bay Area, that'd be great as well! Cheers and thanks.

[Hayden H.]

Hi Steve, Congrats on the cash flowing properties in Phx! Do you have enough equity in your duplex that you can pull out a chunk of cash through a cash out refi so that you can minimize the hard money? I think the HML will want to have a licensed GC do the work and you will want a lender lined up that can cash out refi for you. You can ask Sean Pan from Conventus on the hard money part and see if they are okay with your plan. I think many of them don't want to fund a primary residence but ymmv. Also, just be aware that HML will prob cost 2 points and 10% with extension fees if your rehab goes long. It may be tough to get hard money if you don't have a track record of fix and flips but if the deal is good enough they may do it. Also, depending on how complex the rehab is, it could drag out 1 yr + as permitting can take a while.

I think its a good idea in principle but there are a lot of variables, each being important enough that you need to properly plan/vet ahead of time.