All Forum Posts by: Matt Stricklen

Background:

The wife and I have a nicely performing duplex in Crazy Appreciation, Crazy low inventory, Crazy bid war Town.

There is a sweet spot right now for splitting the duplex into 2 condos for an even higher return: The seller forces even more appreciation by selling 2 units versus the entire duplex, yet the buyer is getting a favorable price for the 1 unit vs single family comps.

Our strategy is to sell one unit and keep the other long term. By doing this, we will be able to :

• Payoff 100% of the existing loans, including the rehab- this is the financing I have questions about below.
• 2X( or more) the rental income of 1 unit with no mortgage vs the 2 units with mortgage. Half the doors, twice the revenue.
• Reset the equation on capex: complete rehab; exterior costs now shared by Condo Association
• Surplus revenue from sale to add to our cash reserves
• No cap gains tax ( we lived in the unit within the last 5 years)

So, now, my overly complicated question for financing the rehab:

I’d like to find the most efficient way to short term fund the rehab ( range 65- 75K)

Option 1:

Borrow against the equity of the duplex- but I am not sure what loan product to pursue here: There is a 1st mortgage and a smaller 2nd. The 2nd has a currently stupid rate. We could roll that into a single loan, plus just enough funds for rehab into a cash out refi, but it seems like throwing money down the drain to pay closing costs on that new loan now, to then turn around and sell in the very near term, paying closing all over again. Is there a product out there that could roll all of this into a single close at time of sale? Am I wasting too much time and energy here on nickels and dimes, and do I just need to get busy with this?

Option 2

HELOC on our primary residence for the rehab only, and leave the duplex loans as is until time of sale and payoff. Advantage: Interest only payments during the short term rehab at decent rates. Disadvantage: Additional risk exposure by involving the primary residence?

Other options?

Personal line of credit ?

Other solutions I’m not thinking of ?

I know that there are arguments for NOT paying off a mortgage- leverage, cheap interest, tax advantages...but that’s a conversation for another sub forum. Please save those replies for elsewhere.

thanks for any advice

@Jordan Moorhead I'm going to ask this here, as others might have the same question, but feel free to answer privately if that's better. 

I was looking at what you were saying about rehabbing your side in July and having to wait until January to start the other side. As the wife and I are beginning to plan a rehab, we are weighing pros & cons of both sides at the same time vs one at a time. We are planning complete remodel from floors all the way up.

Would you have preferred to do both sides at once? Would there have been significant cost savings, for example, in doing all the demo at once? Fewer dumpsters, for instance? Any permitting advantages for doing all at the same time ( especially time required for getting permits)?

On the flipside, of course, by doing one side at a time, we wouldn’t drop the rental income to the scary number of zero for the duration of the rehab. Maybe that’s the greater advantage vs any savings mentioned above?

Thanks for any thoughts that you are willing to share, and thanks always for your time.

Originally posted by @Jordan Moorhead

Devour BP content. Get to so. E real life meetups as they start to happen again - build your network. Build cash reserves however you can. House hack through law school if possible. 

One popped up on.the same street as my duplex in 78745 this week. Maybe a JV?

 Austin has had similar issues and been fighting over proposed code changes fir a few years now. 

Payton Chung do you have any thoughts about what specific areas in Raleigh developers will go to first if changes are approved? I'll be looking into what you said about BRT corridors. Any other insights?

I'd love to speak with that GC. We are ready to remodel our duplex.

I agree. If you can keep your housing cost low in CA, keep your foothold in Austin. There is a lot of room for continued appreciation on your property here, you've already got the landlording experience...let it ride for a couple of years.

PS thank you for your military service.

If you are ready to BRRRR, and close to home, I think you can make it happen in San Antonio.

Appliance costs being pushed up by rising costs of materials... Like everything else.

https://finance.yahoo.com/news...

Stephen Bianes organizes this one

Check out this Meetup with Real Estate Investors in South Austin  https://meetu.ps/e/JQG5r/4vgwY...