I'm hoping someone can shed some light on options to fund a renovation on a primary residence. To be a short as possible, I recently bought a home that I plan on living in and converting to a two family. It is currently a SFH with an in-law apartment. I owe $312k on the home and the current appraisal is 390k. The renovation cost is estimated at $250k and the ARV is $650k. The obvious thing I can do here is use a construction loan from the bank but I unfortunately need a 720 credit score to do so (currently I am at 680). I've talked to a few hard money lenders and have learned that hard money lenders do not do owner-occupied loans. Just trying to see if there are any other options out there, would greatly appreciate it.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
Flag on the play.
$250k to convert it, you can build a brand new house for that so the question becomes why? Next question is zoning is the property even zoned for multifamily? I am also skeptical of the ARV but there seem to be more pressing questions.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
6y
@Thomas DiGregorio Provided the numbers are correct, zoning is allowed, etc, the best way is to get your score to 720. Provided your credit cards aren't maxed and you've made payments on time for the last 12-24 months, you should be in that range pretty easily.
Can you pay off a credit card balance at all (if you have balances)?
$250k to convert it, you can build a brand new house for that so the question becomes why? Next question is zoning is the property even zoned for multifamily? I am also skeptical of the ARV but there seem to be more pressing questions.
Hi Aaron. I am just north of Boston and building a 2600 sqft. multifamily costs $400-$500k. The scope of my project is bringing it down to the studs with all new electrical, plumbing, and HVAC. The current property is zoned for a two-family. Looking at comps in my area, two-family homes are currently going for $600K+ depending on the properties condition.
@Thomas DiGregorio Provided the numbers are correct, zoning is allowed, etc, the best way is to get your score to 720. Provided your credit cards aren't maxed and you've made payments on time for the last 12-24 months, you should be in that range pretty easily.
Can you pay off a credit card balance at all (if you have balances)?
Hi Tom, Thanks for the response. Currently I'm at 5% credit card usage. My only debt is my mortgage and car loan. I do I have one missed payment on my credit history from about 6 months ago. My credit score was 750 prior to applying for mortgages back in May. Since those inquiries it hasn't rebounded and actually dipped again when my mortgage hit my credit report.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
@Thomas DiGregorio why would you bring an existing building down to the studs? You already have an asset that is worth presumably $300k plus why tear it down and spend $250k to make it only worth around $600k. Is it possible to add a secondary unit/ free standing home in front of or behind the current one?
@Thomas DiGregorio why would you bring an existing building down to the studs? You already have an asset that is worth presumably $300k plus why tear it down and spend $250k to make it only worth around $600k. Is it possible to add a secondary unit/ free standing home in front of or behind the current one?
When I say down to the studs I mean a full reno, not tearing it down. It is worth $390k now, spending $250k to renovate will bring the value to $650-$700k. Unfortunately t's not possible to add a secondary / free standing home.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
@Thomas DiGregorio it really doesn't sound worth it at all; you will lose use of the current property for several months at least and spend $250k probably more because we all know how projects like this go. To create a new asset that is worth only $10k-$50k more. Not sure if you are renting it out now but rent on something in that price range has got to be something like $2,000+ per month so if the reno takes a year that is $24,000. You still have to continue paying property taxes and insurance which are going to be another $4-$5k at least if rehab took a year, and at the end you'll likely get reassessed. which may not be a big deal depending on the state but still something to consider.
It seems to me like the $250k could be put to better use elsewhere if investment is the goal. However if you want this to support family or because this is your primary residence and you just want it then by all means go ahead.