My First BURRR on a STVR: It's Possible

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Just wanted to share a quick success story.  I focus on short term vacation rentals in Hawaii.  I enjoy self managing and have acquired several over the years.  I purchased a 3 bed 2 bath about 2 1/2 years ago for $485,000 (30% down, $145,500) from an original owner and it needed a ton of work.  I purchased it, with my intention being to remodel it and throw it in my rental portfolio.  I spent roughly $80,000 and essentially did a full remodel.  All in costs roughly $235k.

6 months ago I asked my local realtor his opinion on it's value. He said around 800k. I messaged my lender who i've made several deals with and she started the refi process. 3 months later we closed with the appraised value of 795k, allowing me to pull out close to 250k. Once the transaction completed I used the 250k to add an additional beautiful condo to my growing collection. I'll net 20+% CoC ROI on the new property (250k down), and i'm still at about 14% on the one I refi'd with the new higher payment.

There were a lot of hurdles, as it was classified as a condotel that I needed to have reclassified, and a few other weird hoops I had to jump through, but at the end of the day I actually pulled out more money than I put in to the first condo to pay for the second, and now I have two very high performing condos using my original 235k.  

I've read in these forums that BRRRR won't work on STVRs (banks wont do it) and I just wanted to share this, so those who might have equity can consider doing it to.

That's a great summary of how you purchased, renovated and refinanced based upon increased value.  

That’s great @Mike V. !
Thanks for sharing. I have a few questions...
1. Was the appraised value affected in any way by it being a STVR?
2. Was the refinance loan a conventional loan? Anything different about it because it was a STVR?
3. Did the property being an STVR prevent you from getting a HELOC? (Or did you just have other reasons why you preferred to refi instead. )

Thanks @Mala S. !

1.  The appraised value has nothing to do with it's use.  Not affected at all.

2.  It was a conventional 30 year fixed at 5%.  The only differences I noticed was that since it's a STVR the bank did make the appraiser provide their estimated long term rental value and that is what they based the rental income on, not the STVR numbers even though I was able to provide 2+ years of history.  I also had to get an 'investor loan' which, from everything I can tell, is the exact same as a regular loan just 1/2 point higher rate.

3. Since I did the Cash Out Refi it needed to be an actual mortgage, since the refi paid off the balance of my old loan. I supposed instead of the cash out refi I could have explored the HELOC. I didn't really consider it so I don't know.

Overall, it really wasn't that hard and it felt exactly like a new purchase, but with a few more hoops to jump through on the loan documentation side.  I haven't found many people who were able to accomplish this, so I wanted to share.

@Kokou F. It wasn’t as challenging as expected but I did hire a GC. I sent the GC my scope of work and he went to visit the site. We discussed the details via FaceTime while he was there. He got me the estimates with the agreed upon scope of work and price. And he started a few weeks later on the start date. He handled all permits and association paperwork. We frequently FaceTimed or texted when issues popped up but things ran pretty smooth. At the end of the timeline I scheduled a trip out to inspect the work in person and it was fantastic. Paid the final bill and that was that. I only met him in person the one time at the end of the job, but he came recommended and had a HUGE online portfolio of his work so I felt comfortable. He also wasn’t cheap which oddly added to his credibility in my mind. I would do this again in a heart beat, but only with a good GC. I’ve also done two smaller remodels since this post that I didn’t use the GC for. I managed the subs from California and coordinated their schedules for access. Replaced floors with tile throughout, new counter tops, paint throughout, resurfaced kitchen cabinets, baseboards, ceiling fans and lighting. It wasn’t too bad. Just get them in the right order and use Skype or FaceTime to see updates.
@Kokou F. It depends. I try to see them in person first but the last 2 i purchased I only saw on FaceTime with a virtual walk through. I’m only comfortable doing this because I know the area so well that the only question for me is the location of the unit within the complex (it matters) and the condition of the unit itself. Then I submit an offer at my price and go from there. The listing prices over here are so all over the board that I pretty much ignore them and just offer what I’m willing to pay.