cash buy-rehab-refinance for personal weekend home?

3 Replies

Hey there, I've been lurking for a while and would love some advice on this.  I'm looking at a 700 sq foot two bedroom cabin listing for $95k on 4 acres of land in a desirable part of the Hudson Valley, NY.   The previous owners gutted the kitchen and the cabin is in need of a new roof.  The bathroom is outdated, but functional.  Supposedly all other plumbing works (although the cabin has been winterized so I was not able to test everything).  Because of the gutted kitchen, traditional financing is not an option, and it would need to be a cash deal. 

I'm interested in putting in a cash offer (for ideally 60/70K and only after having a proper inspection).  From there I see two options: 

#1 - I do, myself, the minimal work to bring the cabin up to living standards, and then looking into a cash out refinance, in order to gain back some cash asap and to have additional funds to continue improving the property down the road. 

#2 - Sit on the property till I have everything top notch (will take me a year to 1.5 years most likely), and then look into a cash out refinance.  I'd prefer to do this option, but will be short on cash initially, so I'll have to wait to really dig into it.

Comps for similar listings in great condition are in the $150k range.  Land itself is comped at about 60K.  Monthy taxes are currently $165.

My end goal is to have a low cost weekend spot, with some weekly rentals in the summer and some Air BNB income in the mix.  I would consider flipping / selling a few years down the road, but for now I would plan to hang onto it.   The main reason for the interest in this property is the location.  

I own a co-op in NYC, so this is not my first buying experience, but it is my first investment / rehab project that doesn't fall under standard finance. Any advice is appreciated. 

Hi Andrew, 

I would suggest at least getting it up to a livable standard. As the property sits vacant not only will your property insurance be more expensive, but you subject yourself to break ins, pipes bursting with no one around and overall decay of the property. Although having a renter or airBnB tenant both have their own set of challenges, at a bare minimum there is someone on premises to let you know if there are any issues so they can be corrected. In a vacant home, a pipe can burst and it can sit there for weeks without anyone knowing (which can not only ruin the whole house, but can cause mold, etc). As such, I think making it habitable at a bare minimum and renting it out on a month to month lease would benefit you in the long run. 

I'm not sure how much your co-op is worth, but you can consider doing a cash out refinance of that property to help pay for the renovations. Assuming you have enough income to qualify and lenders have recently lent in the building that should be relatively easier to do than to get a construction loan. 

If you're interested in discussing further, feel free to pm me. 

Thanks,

Morris

@Andrew Watson , any time you can buy a house for around the value of the land it's on, find out why. Those are the sort of deals that should be good value-add propositions.

On the other hand, a lot of developers might just see the house as a hindrance, so would offer less than the value of the land (because it costs money to get rid of a house).

Also, is there any future subdivision potential?

Look purely on its investment numbers, and its weekender status is just a bonus.

Welcome to BP. All the best..

Thanks Brent & Morris. 

I thought about tapping into my co-op, but I'll most likely be selling that in about 2 years, so I figure'd I'd be better off not touching it. The other option I was considering was a construction loan.   If I'm lucky, I may be able to round up a family loan to fund the bare bones construction, and then pay back when I cash out refinance.  Or, as mentioned above, I would do the improvements as I have the funds available, and really take my time with it.