First time home buyers Duplex

[Chantelle Lewis]

My husband and I just purchased an owner-occupied duplex, and it’s completely vacant. We purchased in a desirable part of Los Angeles and got it for 200k under asking, so we already have some equity. Both units need a lot of cosmetic work/upgrades to get top rent. What is the best way to finance the renovations? We have some money saved, but we don’t think it will cover all the needed work and want to get the unit ready to rent out as soon as possible. We were thinking of doing a personal loan for renovations and then cash-out refinance in 6 months to pay back the personal loan. Pros/cons? Any recommendations for a better approach? 

[Kaylee Walterbach]

Hi @Chantelle Lewis! Congrats on your duplex.

Note that a cash-out refinance could mean getting a higher interest rate down the line (no one has a crystal ball, but they're still on the rise). You'll also have to pay closing costs (which could be ~3% of the loan). Depending on the loan, the market, etc., a refinance might not make sense 6 months into your rehab.

Have you looked into getting a HELOC? I've never done one personally, but if you have $200k in equity that may be your best option. Interest would be much lower than a personal loan.