Trying to use what I've got and make things happen

19 Replies

I currently own a 2 bed and 1 bath home with a detached garage (house is 911 sq ft and one car garage is 280 sq ft). Bought several years ago with my now ex-husband as a fixer upper. Some improvements have been done over the years, but it still needs some more work (there are multiple unfinished projects). Now that I'm divorced, I've found myself without as much disposable earnings and very little in savings.

I'm considering taking out a HELOC to pay for some upgrades to the property so that I can "house-hack". I'd prefer to do short term rentals because of the potential to make more earnings as compared to long term tenants. I'd like to avoid as much debt as possible and also get it paid off as quickly as possible.

Zillow says it is worth about $214,000 and I still owe $106,000 so I'm pretty sure there is some equity available in the form of a HELOC.

These are a couple of my options that I'm considering:

1) Convert the garage into an ADU. It will need a new roof, electricity brought up to code, hooked up to water and sewer, insulated, and heated.

2) Turn the attic of the house into a 3rd bedroom with a bathroom (around 200 sq ft of usable space) and possibly a new staircase that isn't so steep and maybe with a separate entrance from the main house, if possible.

3) Build a tiny/small home in the backyard (300 sq ft or less) and rent that out as a STR, but it would also need to be built to code and hooked up to water and sewer.

Once I'm making a profit of some sort, depending on which option I go with, I'd like to start fixing up the main house. It needs a lot more work before I'd feel comfortable listing it as a STR. The following needs to be done: heating system installed (I'm currently using a wood stove because the baseboard heaters made the electricity bill outrageous in the winter) but I don't feel comfortable having renters use the wood stove as their heating source. It also needs some electrical outlets fixed and possibly rewired... maybe even the house needs rewired since it was last done in the 70's. If there are too many outlets in use the circuit breaker trips. There are also a lot of cosmetic things that need to be done.

I don't feel comfortable listing my spare bedroom right now as a STR because I really value my privacy and mainly because the house needs a lot of work done.

Am I overlooking anything? Suggestions? Input into which options would be the best launching point?? Or should I sell and start over with a new property that doesn't need as much work? 

I would sell as is and pocket any equity. Then I would invest in something that is a normal project. Turning attics to usable space is very difficult. Turning a garage I to a rental is probably not allowed. Not zoned for that or turning a shed into a rental. Also why short term rental-are you in a resort area?

The area I'm zoned for does allow for ADUs just as long as I live in that or the main residence. And I'd like to do a STR because I am near a Navy base and shipyard with lots of workers (active duty and civilian) being TDY from different areas. There is also a housing shortage in the area, so if I don't do well with it being a STR I can easily rent one of them out long term. But there is more profit in doing STR. I'm hesitant to sell because my mortgage is very affordable and rent is very high. Prices are very expensive in my area. Even if I did get a good amount of cash from the sale, with prices being high, I am not likely to get something in a price range I can "afford". I'd like to stay in the area and keeping my house easily allows that.

Also, with Amazon and Microsoft workers expanding outward from Seattle (and thus seeing that Kitsap is more affordable and only an hour commute) prices are going upward here.

I work in the medical field and when I pick up extra shifts I can make decent money. Doubtful I'd make more with an entry level job at Amazon... Plus I'd have to commute. Not interested in all that. Lol 

Have you considered selling and finding a duplex or triplex if you could net 60k to 70k you could look in the 300k range and save your self a lot of work and possible have better cash flow.

Originally posted by @Ronald Avellar :

Have you considered selling and finding a duplex or triplex if you could net 60k to 70k you could look in the 300k range and save your self a lot of work and possible have better cash flow.

Assuming I earn $80,000 from the sale of my house... and say I find a unit for $330,000 that's a $250,000 debt (and a much more expensive mortgage) that I'd be responsible for. I would have to be reliant on having tenants in all units to keep the mortgage current. That's a lot more risk than I'm comfortable with right now. If I had more in savings, I might be more interested. Maybe I could do something like that once I'm in a better position financially. I'd hate for something to happen and I lose everything.

Originally posted by @Kathleen K. :
Originally posted by @Ronald Avellar:

Have you considered selling and finding a duplex or triplex if you could net 60k to 70k you could look in the 300k range and save your self a lot of work and possible have better cash flow.

Assuming I earn $80,000 from the sale of my house... and say I find a unit for $330,000 that's a $250,000 debt (and a much more expensive mortgage) that I'd be responsible for. I would have to be reliant on having tenants in all units to keep the mortgage current. That's a lot more risk than I'm comfortable with right now. If I had more in savings, I might be more interested. Maybe I could do something like that once I'm in a better position financially. I'd hate for something to happen and I lose everything.

Originally posted by @Ronald Avellar :

I understand and agree stay with in your comfort zone. Just trying to spark ideas. :)

It is definitely a good idea though. Maybe after "house-hacking" my current place for a while, I can make that happen for my next big real estate investment.

Originally posted by @Kathleen K. :

1) Convert the garage into an ADU. It will need a new roof, electricity brought up to code, hooked up to water and sewer, insulated, and heated.

2) Turn the attic of the house into a 3rd bedroom with a bathroom (around 200 sq ft of usable space) and possibly a new staircase that isn't so steep and maybe with a separate entrance from the main house, if possible.

3) Build a tiny/small home in the backyard (300 sq ft or less) and rent that out as a STR, but it would also need to be built to code and hooked up to water and sewer.

If you go the Garage Conversion approach, what about living in it, and renting out your house? Not sure if you have kids or your family situation, but maybe could make more money buy renting out the house?

Originally posted by @Roger Wagoner :

If you go the Garage Conversion approach, what about living in it, and renting out your house? Not sure if you have kids or your family situation, but maybe could make more money buy renting out the house?

That's pretty much my goal. I just gotta get some of these projects underway without breaking the bank. I will rent out which ever unit that can make the most money. Each option costs differently and are kinda reliant upon the other. No kids, unless you count my dog... And he's very much like a child. Lol

@Kathleen K. if I were you I'd be picking up all the extra shifts I can for a year since you have a chance to make good money working OT. Grind it out and get your savings in order. From there you will be in a much more stable and comfortable position to try and finish these projects out and find out what your best exit plan is.
Originally posted by @Matt P. :
@Kathleen Kish if I were you I'd be picking up all the extra shifts I can for a year since you have a chance to make good money working OT. Grind it out and get your savings in order. From there you will be in a much more stable and comfortable position to try and finish these projects out and find out what your best exit plan is.

Yes. That's pretty much the game plan. It's going to be hard work, but definitely worth it. 

Originally posted by @Caleb Heimsoth :
@Kathleen Kish

Your ex husband isn’t on title right ?

Nope. Bought the house before we were married. He is on none of the paperwork. He tried fighting me for the home though. But I proved he bought some real estate with marital assets (and hid it from the court) before/during the divorce. He created an LLC to pull it off. He's lucky I didn't ask for all that in the divorce settlement because the judge was not pleased after learning he did that. Lol But I'm glad all that is over with.

If your looking for low risk just sell the house and buy something you can afford. Maybe you could get mortgage-free. You said your against re-investing your money into a duplex because of risk, but honestly, all of your plans sound harder and riskier than a duplex.
Originally posted by @Thomas Ferreira Jr. :
If your looking for low risk just sell the house and buy something you can afford. Maybe you could get mortgage-free. You said your against re-investing your money into a duplex because of risk, but honestly, all of your plans sound harder and riskier than a duplex.

Thank you for sharing. I'll keep my eye out for some properties in my area. Since I'm near the Seattle area, prices have gone up quite a bit and go pretty quick though. I'm in a pretty good location right now and don't want to move out of the area. My mortgage is very affordable. I think I'll just focus on working extra OT and go from there.