The Afters: How I turned an Old Victorian in SLO into a successful STR

This project has been a labor of hate... and also love. It cost me literally hundreds of thousands of dollars... and thankfully is also raking in a bunch as well. There were some large contributing factors that drastically affected the budget - in particular categorically huge rainfall that caused extensive water damage and necessitated a brand new roof. This also delayed our timeline and extended the length of time in which we were covering holding costs without income.  

Additionally - the original vision was to convert an old carriage house into a third dwelling residence - a projection that would have increased the value of the property much more! 

Ultimately - the property is up and running as a duplex - with full time tenants on one side paying $5,500 monthly and the other side serving as a furnished short term rental, averaging $5,500 per month - with a peak so far of over $7,000 in one 30 day period. 

More about the numbers:

1. 1. Purchase Price: $1,150,000
2. 2. Loan Amount: $1,175,000*
3. 3. Appraised Value at Purchase: $1,298,000
4. 4. Holding Costs During Reno: $65,250
5. 5. Repair & Reno Costs: $450,000
6. 6. ARV: $1,670,000
7. 7. Monthly Holding Costs: $8,175**
8. 8. Average Monthly Income: $10,500

*This strategy was suggested by an investor-friendly lender who used a product that allowed me to get a loan for slightly higher than purchase price so that the balance ($25K) could be credited to me at closing and therefore lower my out of pocket requirements on the down payment. 

**This reflects mortgage, PITI, but DOES NOT include two interest-only construction loans.

BRRRR Math:

1. 1. 75% ARV = $1,252,500
2. 2. Balance on Loan = $993,434
3. 3. Cashout: $259,066

While the BRRRR strategy was always the intention, I have ultimately decided not refinance as rates have gone up exponentially and a bunch of personal circumstances have made it more beneficial for me to sell and 1031 into a smaller, closer and more manageable property. 

This property cost me a BUNCH - but holy heck did I learn a lot. I was intimately involved in every step of the design, project management and construction process. It was a masterclass - the experience of which will take me into every step of my continued journey as an investor as well as deeply inform the advice I give to my investor clients.