Hey BP, I'm in a bit of an analysis paralysis right now. I am located in Austin, TX.
I'm currently trying to purchase a duplex with an FHA 203K loan and with the purpose of refinancing in a year to be able to pay off the FHA loan. The duplex has two 2/1 units that are in need of mostly cosmetic renovation(new flooring, paint, counter tops). There is also an unused garage attached to one of the duplexes that can be turned into another bedroom and bathroom. I plan to keep the property for passive income.
I think that adding an extra bed and bath will not only help drive the appraisal rate of the property for the refinance, which gives me a higher chance of paying off the original FHA loan, but will also allow me to rent it out at a higher rate. I could spend most of the 203K loan doing this and spend less on the cosmetic renovations, or take that money and keep the 2/1 mix and really make the interior of the units look updated, just like the house across the street did.
-Does not having covered parking make a difference to renters? Parking would just be in the driveway and the street.
-Is there anything that I am missing in my plan? Adding a BR/BA and spending less or cosmetics or not adding the BR/BA and really modernize the interior could both drive up the appraised value of the home. Comps are relatively the same for either scenario, maybe a 10K difference higher for the really updated properties.
Please let me know if I need to provide more information. I'm brand new to the game!
I would talk to a Realtor to see the ARV for cosmetic fix up vs. garage renovation. You will also want to confirm with the city and the HOA that they will even allow you to convert the garage into another bedroom.
Question: How do you plan to do a refi and pay off the FHA loan after just one year?
@David Ferrette Sorry, didn't tag you when I was on mobile.