Now that thing is done, I can finally say that this is the biggest rehab and biggest refinance deal that I ever have ever done up to date. The whole thing was a roller coaster ride from the beginning since we had no idea what we are doing.
Up until the appraisal value came out, the whole project could be still a bust but I am so glad thing turned out well.Â I will try to recap it below:
Jenny and I start to look for the next Airbnb project after our initial success with the Tiny House. there are not a lot of unrestricted lot around or within our city. After Countless searching hour. we are able to find one on the MLS. It was a beat-up house,, almost a teardown and the seller decided to drop the price by $2,000 every day until he got a buyer.
We did what we always do. running comps and check out the unit. If you want #infinitereturn, you need to make sure the appraisal value, market value of the house is, of course, more than what you put into the house, and the monthly rental rate have to be enough to support the mortgage. For example. If you buy the house for $100,000, and spend another $100,000 to fix it up, the house needs to worth least $275,000 after repair. Then your loan officer can help you cash it out 75% or 80% of that value depend on where you live, you get all your capital out, and have a house.
That is exactly what we did with the Attic Project. I will talk about the construction aspect of the project in a different post. Just want to illustrate what was done here on the number, We bought the house for 105,000. Spent more than $100,000 to fix it up and furnished it (yes, is the biggest rehab we ever did).
Here are some before and after pictures
Some work in progress pictures
I just checked zillow and they still have the old pictures when we bought it
One of my Airbnb guests actually google the addressed, got freak out, and call me to confirm…
Luckily It looks like this after the renovation now
Anyway, the math looks like this. Bought it for 105k and some, fix for 100k and some. total in is 200k
I am so stressed out when the appraiser came. This is the moment of truth, if he didn’t like what he is seeing, doesn’t find the comps to support the refinance price, then it’s over. There is always a risk when you rehab house in a revitalizing area where comps are just all over the place. So I took the time to make sure that the property looks like a million bucks before the appraiser came.
Thanks to our awesome appraiser, the appraisal value came back to be $275,000. That allows me to cash all my capital out (75% of the appraised value), get the asset on a long term solid financing plan (30 years mortgage at 4.35%) PITI is around $1300 a month and the room upstair is bringing in also around $1300-$1500 a month before expense (yes, those toilet paper added up, I have guest that used the whole roll in a day. I don’t know what the heck they are doing..)
I know the number suck. some month I went negative cashflow on some month. The way I look at it is that I haven’t unlocked the full potential of the house yet. that $1500 a month is just from one room. Downstair with two-room is still underutilized, and the lot is 10,000 sqft, which is enough for… you guys know what will come next on the back!
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