All Forum Posts by: John Catlett

Hello BP,

My name is John and my wife and I currently have one long term rental and our primary residence. As we have just moved into our primary, we are ready to take the next steps on acquiring our next rental. We are looking to add an ADU to our primary in the form of a short term rental as it is in a desirable location (A market for STR according to AirDNA) and make this a house hack. Depending on seasonality, we could potentially offset our entire mortgage. (~$2,500)

We currently have ~$100,000+ of equity in our rental and are looking to leverage that to make our next move. Here is my question: How should we best utilize this equity in order to add the ADU/acquire our next property?

Some notes:

-Our rental property has gained a lot of equity since we purchased it (~$100k)

-It also has very strong cashflow (~$700 after expenses)

-Our interest rate is very low (<3%)

-It is in a desirable location and we want to keep it

-We are hesitant to do a cash out refinance since out current rate is so low

We are looking at utilizing a HELOC as we know it is difficult to find traditional financing for an ADU. However, we also recognize that HELOCs are better utilized for short term purposes. What are some considerations we maybe aren't thinking about and how would you go about adding a 1bed/1 bath ADU knowing the information above? We are projecting the cost of adding the ADU at roughly ~$100k, but have not yet gotten bids/priced it out officially.

(Additionally, is there a different strategy we should consider that is different than the ADU/house hack method?)

Thank you so much!

So a little update: the seller isn't opposed to seller financing but will want about 25% down. With that being said, I'm having trouble calculating an accurate ARV. This property is in a rural area and the School house type structure is on a small lot that doesn't match the other property types in the area (they are mostly bigger houses on large acreage farms). I want to make sure my numbers are accurate so that I can refinance this correctly and pull my down payment back out when the time comes. (Thinking about using the BRRRR model). Thanks for the advice and patience as I try to piece this deal together!

Hi John,

Thanks for the reply. The property was actually under contract the last month or so but just popped back up on the market. I suspect the previous deal fell through due to an issue with financing. Hopefully because of this the seller will be up for financing until we can add a kitchen and refinance. I hadn't thought of the leasing option so thank you for that! I suspect the seller is ready to offload this property so I'm glad there are a couple different ways to approach this deal. Thanks again!

Hello Everyone,

I am looking at a deal that could be pretty cool. This would be an AirBNB in wine country where there is already a very high demand for AirBNBs as their is no hotel nearby and other AirBNBs in the area are very successful. 

The structure I am looking at used to be an old schoolhouse (about 1600 Sqft) and our vision is to convert it into a cool/quirky AirBNB. It already has a bathroom but there is no kitchen. I spoke with my Broker and being that there is no kitchen they are not able to provide conventional funding. I am currently exploring private lending and seller financing options but in the event these options don't work out what other creative financing options should I look into? Any insight is helpful. Thank you in advance!