My mom lives in a nice house that she has paid off. However to save money when she had the house built, she left the basement unfinished--it is just studs, insulation, and windows/doors, plus plumbing in the foundation. There's obviously opportunity here to build this out and turn it into a basement apartment, which I think would cash flow because of course there's no mortgage.
What I'm wondering is: is there a way to get the cash invested into this rehab back out of the property in a relatively short timeline, as if it were a BRRRR? If I had just bought this property and could force some appreciation, I could refinance and hopefully extract that equity within a year, for example--but since this house is paid off, refinancing would introduce a new mortgage payment.
What are the options here? Get a new loan only for the equity created by this rehab? Refinance the whole house as long as the rent exceeds the mortgage? Just let the money live in the house and collect rent as the only ROI?
1. Cash out refi only if the rental income significantly exceeds the monthly payment and you want liquidity to invest elsewhere.
2.You can maybe do a HELOC if you want a smaller loan that doesn't involve refinancing the entire house.
3. If you have cash on hand to fund the rehab and want to extract it soon after the project is done, you can use delayed financing. You pay for the basement reno out of pocket and cash out immediately...instead of waiting for 6-12 months
I do want liquidity to invest elsewhere which is why I'd like the cash back from the reno ASAP, but I don't need liquidity equal to the value of the house--just the basement build-out, if possible.
With option #3--how do you "cash out immediately"? I would plan on paying for the project out of pocket.