1st AirBNB with BRRRR ADU is a hit

[Wayne Yahnke]

Hey BP Crew,

Just wanted to share our most recent success. We purchased a commercial property that was a residential home converted to 2 commercial units and an ADU. Essentially a duplex with an ADU. Closed in May 2021. Jumped through numerous hoops to convert this property to a 3 unit property (SFH, JADU & ADU).

Remodel consisted of full downstairs gut in the duplex. Adding 2 sub-panels, Added 2 kitchens, converted two 1/2 baths to full baths, removed the dated HVAC replaced with miniSplits, added LVP flooring, paint and fixtures in both units. 

ADU needed carpet, paint and we added laundry services, upgraded the lighting and fixtures. Also added a new stove, furnished the place and added our personal touches with Art and Decor.

City had us add fire sprinklers to the duplex and a carport. Ugh! This essentially put us $30k over budget. 

Duplex units are going for $2k each and ADU in the back could go for the same. However we decided to use this as an AirBNB and a crash pad for ourselves as needed.

AirBNB is tucked away behind a fence with a nice garden area and needed minimal rehab. The location is optimal as it is walking distance to downtown. 

The AirBNB is booking 6 weeks out with a 70-80% occupancy. It is bringing in double the market rents for its size ($4k). All of the guest love it and the reviews continue to come in as 5 stars. We are automated with IGMS & Pricelabs. 

$645k Purchase Price-Negotiated down from $689k. We used an environmental test to prove that the acoustic ceiling was asbestos and got quotes for mitigation as leverage to bargain down while in contract. 

All in $830k (645k purchase, 130k rehab, $55k Private money note)

$954k ARV Appraisal (challenging appraisal as we speak hoping to break the $1m evaluation mark)

Most will think this is a crazy evaluation for 3 units. But this property is located in Wine Country, CA.

Rental income $8k

Total Monthly profit after expenses $1k-$1.5k 

Not a home run by any means but this is in a desirable neighborhood and near the downtown area which is appreciating rapidly as well as experiencing significant new construction and development. We will most likely have to leave some cash in the deal (bring some to closing plus the $30k).