SF Garage conversion to STR

[Charlotte Chew]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $90,000
Cash invested: $20,000

Single Family, 2 bed, 1 bath. Built 1954. I put in central air, updated electrical from fuse box to breaker box. Converted garage & utility to a master suite with a wet bar. Garage is now an Air BnB and someone is renting it for two months. AND I have a roommate. This area is also going through gentrification.

What made you interested in investing in this type of deal?

I could only save enough cash to do owner occupied financing so it'd be my primary residence. I was looking for something that would make a good rental that I could force appreciation on through rehabbing it.

How did you find this deal and how did you negotiate it?

My friend from work lives next door. The owner passed away and his grown kids were cleaning out and selling the property. My friend knew I was looking for a house and she gave them my number. Off market deal, FSBO.

How did you finance this deal?

It was a roller coaster!! I intended to do an FHA 203k loan but could not find a contractor who had all taxes filed and could provide all the necessary paperwork. I tried to do a regular FHA but the house didn't qualify (peeling paint, 40 year old furnace etc). I ended up doing a 5% conventional in the end and using bank loans and credit card for the rehab.

How did you add value to the deal?

I put in central air and am updating the electrical. I converted garage/utility to be another bedroom & bathroom so it's now a 3/2 from a 2/1. I can still update the kitchen and bath to add value but that's the next phase.

What was the outcome?

Someone is renting my Air BnB for TWO MONTHS!

Lessons learned? Challenges?

This was really dumb but worked out in the end. I was doing an FHA loan and house didn't qualify because of old furnace,so owners let me put in HVAC before I closed. The house still didn't qualify after updated HVAC bc of peeling paint so, luckily, my lender could switch me to a 5% conventional and I was able to close. That could've been an $11k lesson but the house is mine so we're all good.
Also, if a contractor's truck breaks down, he's probably not the one you want to hire.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Dale Lucas, Movement Mortgage
Mona Hughes, Keller Williams