build a second story or invest out of state?

Question

Hello fellow BP members,

I'll try to be short... My home is in Oakland, Ca. Hot market. Purchased with a 203kFHA in 2013 for 118k.. after renovation value 215k.. final price 209k. Current value 375-400k.

i built an in-law that brings in 1000/mo via AirBnb. my mortgage is 1283/mo :)

my budget is 125k. Id like to build a second story with a private entrance. In my market it can rent for 1400.

Should i pursue the project or save money and buy out of state with cash? pros/cons?

Ive added pics of the remodeled home and AirBnb unit.

Brian Ploszay · Answer

My first thought was that this is a very basic structure.  In my market, it would be a tear down.   Are you sure you can build a second story for only $125K?   The whole structure would have to be beefed up to accept the added weight.

By the way, I would vote for a 3rd option:   Take that money and invest in another property in your local area.  Be patient and you will find one.

Ingrid J. · Answer

@Ansel Troy Great job on the property! Have you looked into the possibility of refinancing and pulling some cash out? And how about a 1031? Is that possible for am exchange to a bigger property?

With the good work you've done I wouldn't do turnkey. You have an unfair advantage as Robert Kiyosaki would put it in your ability to rehab houses.

Aaron K. · Answer

Make sure that zoning would allow for a separate unit before you build anything, but if that works out I'm always a fan of maximizing the properties you already own before going out and buying more.  Also being in Oakland I think having three units on a single lot would increase your value a lot (assuming they are allowed and permitted of course).

Jonna Weber · Answer

Welcome to the community, @Ansel Troy!  We work with a lot of out-of-state (California) investors who have decided to invest out of state because of the current California market.  Sounds like you have really done your research on different options!  I look forward to following your journey on future forums!  You have some great things in place.

Dante G. · Answer

Wow you did a great job with that property, why not just do it again? With a full time job and a kid it would probably be easier to get another project done locally than out of state IMO.

How was the process of getting a 203k FHA loan? I want to do something like this soon but I am concerned that sellers don't like this type of financing...

Ansel Troy · Answer

@Ingrid J. Thank you. I sure wish i could rehab houses. I hired professionals to do the work. One of my goals is to learn carpentry, electrical, and plumbing.

i haven't considered the 1031. In a perfect world, the income from this property will pay for itself and another property. fingers crossed..

Ansel Troy · Answer

@Aaron Klatt Thank you. I've contacted a few architects. The zoning for 2 units on my lot is conditionally permitted. Its up to the city. I think i have a good shot.

We may call this, "extreme" house hacking :)

Ansel Troy · Answer

@Jonna Weber Thank you! my local market is extremely competitive. Lots of seasoned investors. I've met some people who have properties out of state. Its very tempting

Ansel Troy · Answer

@Brian Ploszay Thank you for the feedback.

The feasibility is to be determined. I have a meeting with a contractor this week. He's retired, but a family friend. Ideally he'll tell me if it's doable with my structure.

In my local market, a basic 800sqft 2b/1ba just sold for 400k. High cost to compete. I can buy with cash out of state. I cant even compete in my market.

With a full time job and an energetic 3 year old. I'm looking for the lease stressful route to an earlier retirement.

build a second story or invest out of state?

Most Popular Reply