All Forum Posts by: Hana N.

@Drew Sygit Thank you for your reply!

I was accounting for the HELOC payment with the rental income from the ADU on the new property.

However… I am working on some more thorough number crunching.  With the price of construction sky high right now…. A duplex conversion really eats into my heloc…. And I wouldn’t have enough for the down payment on the 600k multi family.

So I’m taking a step back and pivoting.

My city planning department truly encourages ADU's and converting SFUs into duplexes due to the housing shortage in our area. They hold workshops about converting your homes through the planning department.
Other investors have shared that I really need to consider vacancy / cap ex, and how that will negatively affect my cash flow. However, My area has such a shortage of housing that properties are not vacant for long. There are waiting lists in my area.

I’m considering experimenting with a smaller budget remodel… and not putting in a full kitchen… just a kitchen with fridge and microwave.  Then potentially renting the one bedroom suite out with Airbnb. My city has no permits required for such use, as long as it’s owner occupied. The one bedroom suite has its own entrance, yard, huge 700sq ft. living space with Billard table, dinette booth, large sectional, tv, etc.. I think it would make a great short term rental… as an experiment to see how we feel about it.  It’s one step closer to splitting up the space up as well

 I really appreciate all the advice.

Thank you!

Thank you for your advice!

Option A would be cash negative for a while.

I was leaning toward option B... But I will do some serious numbers crunching. As this will also likely be cash negative in the beginning.

However, as Dan mentioned, I live in an area ( Monterey peninsula) that appreciates in value rather quickly. (2 hospitals, a university 20 min away).  So it will be a performing asset at some point.

My goal is to turn the house I currently live in... Into an asset.  Not just letting the equity sit here untapped and uninvested. I want it to perform and benefit my life.

I want to take action... Smart action. And not get sucked into analysis paralysis.  But I need to be prepared and have a good plan to move forward.

Thank you for sharing. I truly appreciate it!

Thank you Dan!

I truly appreciate your thoughtful and experienced guidance / opinions here. 

It makes a lot of sense to hold off on any OSS investments until I get more experience, especially in managing locally.

Thank you!

I have 150k in my Heloc.

I am considering three investment options:

A. Putting 20k in upgrades to get my current home "rental ready". No permits required.

I would then rent out my current 3/2 home to a long term renter. My current mortgage is $2,500 and I can rent the home for $3,000.

Cash flowing at $500 ( minus maintenance fees.... So maybe not much cash flow )

Then...

Putting a down payment of $120k on a multi family property about 90 min away... and living in one of the units. Total Mortgage would be $3,300 but I could rent out the other unit for $1500. ( My portion would be $1,800 plus utilities).

This option feels like something that could be done relatively quickly. But not cash flow as much. Still I would be saving on what I currently pay with my mortgage. Probably breaking even.

Or.... Option B...

B. Using a portion of the HELOC to convert my house into a duplex and rent both units out and get instant cash flow. I figure I could split it practicaly in half... and clear about $4,300 in totally rent. I just need to block/add two doors... add a small kitchen, separate the HVAC and update the electrical. I'm hoping to keep this under 30k. Is that unrealistic? Lol. Permits are required but my city is ADU friendly and mandates a less than 60 day approval process. I can see this taking 3-6months. Depending on contractors. Want to be realistic on timing. 

My current mortgage for my 3/2 (1,900 SQ ft) is $2,500. Rents for a 2 bedroom 1 bath home in my area go for about $2,500 a month. The one bed/one bath could get at least $1,500. Maybe 1,800. It's 900 sq ft.

This gives me about $1,800 in cash flow - minus maintenance fees.

I would use the remaining $120k of my HELOC to put a down payment on a multi family property near me and live in one of the units. paying $1800 plus utilities after rent collected.

Or... Option C.

Use the HELOC money to buy a multi family unit outright...out of state.

No mortgage just the HELOC payment until it gets paid back.

This requires option requires no moving :) but less cash flow. Adding to my portfolio... But have to put my trust in unfamiliar property management. Willing to do that if it helps get me on the path to real estate investing.

Ok wise investors... What say you?

Thank you so much for your opinions and advice :)

I have 150k in my Heloc.

I am considering three investment options before me as I look at:

A. Putting 20k in upgrades to get my current home "rental ready". No permits required.

I would then rent out my current 3/2 home to a long term renter. My current mortgage is $2,500 and I can rent the home for $3,000.

Cash flowing at $500 ( minus maintenance fees.... So maybe not much cash flow )

Then... 

Putting a down payment of $120k on a multi family property about 90 min away... and living in one of the units.  Total Mortgage would be $3,300 but I could rent out the other unit for $1800.  ( My portion would be $1,500 plus utilities).

This option feels like something that could be done relatively quickly. But not cash flow as much. Still I would be saving on what I currently pay with my mortgage.

Or.... Option B...

B. Using a portion of the HELOC to convert my SFU into a duplex and rent both units out and get instant cash flow. I figure I could split it practicaly in half... and clear about $4,300 in totally rent. I just need to block/add two doors... add a small kitchen, separate the HVAC and update the electrical. I'm hoping to keep this under 30k. Is that unrealistic? Lol. Permits are required but my city is ADU friendly and mandates a less than 60 day approval process.

My current mortgage for my 3/2 (1,900 SQ ft)  is $2,500.  Rents for a 2 bedroom 1 bath home in my area go for about $2,500 a month. The one bed/one bath could get at least $1,500. Maybe 1,800. It's 900 sq ft.

This gives me about $1,800 in cash flow - minus maintenance fees. 

I would use the remaining $120k of my HELOC to put a down payment on the multi family property near me and live in one of the units. paying $1500 plus utilities after rent collected.

Or... Option C.

Use the HELOC money to buy a multi family unit outright...out of state.

No mortgage just the HELOC payment until it gets paid back.

Ok wise investors... What say you?

Thank you so much for your opinions and advice :)