Best course of action

[Christopher Wedde]

I am requesting assistance on this problem of “best course of action”. Sorry for the long post, trying to give enough info. Thanks to everyone who reads it! Please give me any and all thoughts.

Background

I own a Tri-Plex that I currently live in, with Unit 1 & 3 rented. I have been renovating the unit that I live in and it is almost complete. Thinking it will be done in Mar. I have a Tenant in Unit 3 that is late on rent and I am ready to get rid of them. They are on a month to month lease, so I figure that ending the lease will be quicker and hopefully less of a hassle, I am working with a lawyer. They will have 30 days to leave so it will be vacant by the end of Jan. I don’t really expect them to pay rent for the month. I do have the deposit.

Unit 3

Since I am renovating my unit I did have an idea to renovate the other two and create a 4th. However with the possible unexpected “eviction” of unit 3 I am wondering how extensive of a renovation I should do. Unit 3 doesn’t seem bad, need to take a look after “eviction”, will need some fixes here and there. It has plaster walls and one bedroom, bathroom and kitchen have lowered ceiling that I really wanted to raise. The ceiling is currently about 6’6” and it could be about 8’ 7”, if the same as my unit. Other than that I would just need updates and another round of plaster wall repairs. Also I want to add a washer and dryer to the unit. Possibly get an extra $100-$200 for the unit.

Unit 4

I also plan on making a 4th unit as a studio type. The building is set up to support this and I figure going from a tri to a quad won’t be terribly difficult with the town. I will need the 4th unit to be stripped to studs, plumbed and wired appropriately. Since it is just a large bedroom attached to Unit 2 indirectly (via stairwell to 3rd floor) that I am living in. Already added a toilet!

Unit 2

The unit I am renovating/taking showers in. Which will be a three bedroom

Plan

Two plans actually. Also looking forward too other options/opinions and which way is the best way to go. First is to do a quick rehab of Unit 3 and do a full rehab of Unit 4. Second is, should I do a full rehab to both units 3 and 4? I was quoted about 40k to do Unit 4 as a studio. So I am expecting about the same for Unit 3 which is twice as big but won't need as much work. Either way I would need a loan for each renovation ($80k total). I will be negative ($675 ish) with only one unit rented but if I can finish my unit by Mar and get two roommates I can give myself breathing room (+$300 ish). Which will help pay for the extra loans I will have/or use a CC with no interest for X amount of months (which every way I go to get money). I bought the building at 165k and it appraised for 205k (probably less since Unit 2 is not habitable right now) at the time. A bank offered to refinance my VA loan and give me 100% of the appraised value. I figure once I am done renovation it will appraise well and it will help pay off the loans. I expect each unit to take 6 months to renovate so I will be done around Nov of next year with both.

I wrote all the numbers and planned the whole year out with each month’s numbers using the expected time frames. Did not include debt service on the loans I don’t have yet though. My current job also will allow a minimum of $1400 in breathing room after all my living expenses are paid. If any more information is required let me know, I can also send my written plan to anyone who wants it. Thanks again!