Nomad, House-Hack, & BRRRR at the same time...

[Julie Hill]

Hey all,

Sorry for the long post but this deal is an interesting situation and would love some insight on the best way to pay for the renovation:

Our town (Arvada, CO) just made STR legal for up to 3 properties. We love the STR model and our place is situated just a block from the action so we know it will do well. As soon as it became legal, my husband and I started looking for a new house to buy to move into for a few years until we buy our next one, etc. so we can STR our current one. Obviously, we were looking for a value-add opportunity and found an incredible house in the area of Denver we've always wanted to live in & are currently under contract on it (owner-occupied conventional loan). Although the market is INSANE in Denver, we got a pretty good deal on this property but there is a lot to do on it because it was single owner since the year it was built in 1951. Currently, it has 3 BR's on the main floor and 1 Bath. The basement has a separate entrance right on the street and is already fitted with 3 rooms that could be BR's and 1 Bath. We will have to come in and make those bedrooms conforming with egress windows and 1 needs a closet but the rest of the basement needs an entire makeover (new floor, new bath, add a kitchen, add a 2nd bathroom etc. etc.). We can also add a bathroom upstairs and extend the kitchen a bit for a better footprint. When we are all done, it will be a 6 BR, 4bath house and will be beautiful in one of the hottest areas of Denver. Not only that, but we will be able to live in the top and STR the basement all day long (legal in Denver when it's your primary residence). Once we move out in a few years, we will rent both units as long-term rentals.

Where am I going with this? Well... I am self-employed (high-end wedding & corporate video production) and obviously, 2020 has not been kind to my biz. Our lender is currently using our 2019 P&L. We will be able to add $200-$300k of appraised value with the renovations so ideally, I would love to refinance when done in order to pull out the cash we spend on the renovation (and more) and put that towards another purchase in Birmingham where we also invest (we want to stay in this Denver house for 3-4 yrs before moving because the STR income will more than cover the mortgage and be quite profitable). Our lender says we can keep using my 2019 P&L until Oct next year when we will have to submit tax return which will show a not so stellar income. However, this house closes end of Nov. which means traditionally we wouldn't be able to refi until NEXT Nov (which is too late because then we will have to go off of 2020's income). I really don't want to leave the cash in this house (it will not be a cheap renovation). So here are my questions:

1) Is there a lender (who services CO) who is willing to refi after 6 months vs 12?  They would need to be self-employed friendly!!

2) If there isn't a lender that would work for us, then the next option is to finance the renovation instead of paying out of pocket for it. Any great programs for this?  We just refied our other investment properties so not sure I could get a heloc on them (even though there definitely is equity).  I have never applied for one so I just don't know and have heard these are hard to get right now anyway.  I keep seeing commercials for Sofi home renovation loans - any insight on their program? 

Thanks in advance!!!