What to do with 100% equity in my house?

Question

Looking for some insight from the community.

I live in CT, and recently purchased a 2 unit multi-fam for $100k. I was able to pay for it fully from my savings and own 100% equity. The first floor is rented out to a tenant and the second floor is vacant. I’ve been debating on what to do in the second floor unit, here’s what I’m thinking:

1. Reno the second floor unit (it’s only a 1 br), but has a huge attic (that’s connected to it) that can be turned into a second (huge) BR (or even 3 br). To do this Reno would cost me about $16K, which would leave me pretty much without any cash (and I would have to put about 8K-10K of it on my Home Depot card). But my goal here would be to BRRRR so that I can finance my next multi-fam. I should add, I have never BRRRR’d so this would be my first time.

Or

2. Do a minor Reno in the second floor unit (not touching the attic), rent it out ASAP and start getting some cash flow going so that I can save up to put a down payment on my next property.

My goal is to find the best/most efficient way to be able to fund my next multi-family.

Which idea do you think would work best? Is there a better/more efficient way to get to (fund) my next multi-fam?

Any insight would be greatly appreciated.

Mack Benson · Answer

Fist off, congrats on the purchase. The situation you find yourself in seems like a good situation to be in.

By 2 unit multi-family I assume it's a duplex so the value is based on market comparable. A couple things to be mindful of with option 1. Can you renovate the attic and turn it into one or two bedrooms? I would check with your municipality to see if it is acceptable and what the permitting looks like. After that I would check on comps in the area for similar bedroom counts on duplexes. This would let you know if it would make sense to BRRRR or not.

Option 2 seems like a more conservative approach but may take BRRRRing off the table so you will need to save longer to afford the down payment on the next property.

If you haven't done it already I would run all of the contingencies through the BiggerPockets Calculators to see what will give you the best bang for your buck.

I wouldn't get hung up on the fact you've never BRRRR'd, nobody has done it until they do it and plenty of people out there have proven that it is possible.

Jordan Burnett · Answer

Have you run the numbers on what the actual after renovation rent will be on the 2nd unit and compared that to your ROI of doing that investment versus renting it out as is?

What to do with 100% equity in my house?

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