What would you do?

[Erin Hollen]

My 2 brothers and I are inheriting my fathers residence. It is a duplex that needs considerable cosmetic work on the one side. The side where he lived just needs paint and flooring. I am the executor of the estate and my brothers agreed to let me buy them out on the house so i can use it as a rental property to supplement my retirement. There is a 41k outstanding equity loan on the house. Since my father passed away unexpectedly, i do not have cash in hand for the deposit. So my plan is to use the equity in my own home for the downpayment and for the repairs and take out a conventional mortgage for the house itself. Its last appraisal was for 65k in 2017, last tax assessment was 35k. The house next door, also a duplex with exact same floor plan but in better shape, last sold for 125k. Rental estimates for each of these apartments is $700-$900 per month. They are 2 bedroom/1 bath apartments.

Can this be done? How would you do it? Any tips or advice? Keep in mind that i dont know what i dont know.

TIA

[Taylor Dasch]

You could just refinance the property and use the $ to pay your siblings. If you could get it to appraise for 125k you would have about 90k to work with, you could pay the loan off and give your brothers their portion. I hope I understood your question. For using the equity in your own home, you would need to do a HELOC, in TX its pretty hard, I am not sure about your location but it would be best to speak with a lender who does them. Probably can find one on here pretty easily!

[Gino Barbaro]

@Erin Hollen

Please create a budget to see what it'll cost you to do all the repairs. If the repairs cost too much, then it may make sense to sell it. You can refinance the property and pull some money out to complete the repairs.

How much do you have to buy out your brothers. That is another factor to see if it's worth rehabbing the property.

[Karolina Powell]

Hi there from another Pittsburgher,

Yes you'll want to get an appraisal done now, specifically so you can figure out what your stepped up basis is and then that way your brothers and you know you all got a fair deal.

Second, take a good look at what you need to do to rent it versus what you would like to do.  I made that mistake a lot in the beginning - yes putting in new cabinets will be great but it won't impact value much in some of the neighborhoods I'm investing in, for example.

If you're local to the area, I think this is a great way to start in the REI world!

[Nathan Gesner]

Quote from @Erin Hollen:

You have some great advice. I would start by talking to the lender to see what loan options are available and what the monthly payments would be. The bank can also order the appraisal to determine the current value. Do the math to see if it leaves you enough cash to repair. You also want to compare the rental income to the expenses to see if it will make a good investment.