REFI in gentrifying area

[Chris Walsh]

Hello,

I was hoping for some advice on refinancing a property.  I purchased a duplex for $61,000 in Cleveland, Ohio.  I inherited a tenant who was paying $450 per month.  I took out a Cuyahoga county home improvement loan for $25,000 at 4% over 5 Years to fix up the vacanct top unit.  That has been renovated and now rents for $1200 per month.  I am going to renovate the bottom unit, out in glass block windows in the basement and redo the driveway.  This can be done for $25,000 as well.  It is the same size as the top unit and should rent for $1200 as well.  When it’s all said and done, I should have $110,000 into the property with $2,400 per month in rent.  I want to refinance the property, pull all of my money and and repeat.  

The area is in a neighborhood that is changing for the better very quickly. There are new homes being built on this street for $285,000-$300,000.  Less than 1/4 mike away, there are duplexes of similar size that are selling for $250,000 plus.  There are houses on my street that are still a little sketchy.  Investors are trying to buy them up.  

What are the appraisers going to use as comps when I go to refinance the house?  What are the main things appraisers look for when determining the value of a house?   

Are lenders willing to lend for the improvement of the down unit as a bridge to refinance?

Any insight would be helpful. Thanks!

[Randy E.]

@Chris Walsh, I'm no expert but my experience is that the appraisals tend to be a little behind the market in my market. About 18 months ago, I attempted a similar approach with a SFR in a rapidly gentrifying area. The appraiser came in well under target that time. About 60% of what I was hoping. I'm hopeful that the new appraisal come in higher next week or two, but I don't know it will match my expectations. The market is well above what it was just a year ago. I see gut jobs the same size as mine, three blocks further into the non-gentrified zone selling for $90K in recent weeks. My appraisal better be better this time around.

Fingers crossed for us both.