Houston, TX · Member since 2015 · 9 posts · 2 votes
Hello, I recently purchased a home that was already rented out with a tenant. They have until September before the contract is up and I took out an investor loan for it. The current lease rate barely covers the loan in which I will need to refinance out of soon. My question is, do you do exterior rehab and try to refinance out as quickly as possible or should I wait until September when the tenant is out, rehab the property, and then refinance out?
I am getting my feet wet again after 10+years so would appreciate the feed back.
Have you spoken to them about moving earlier than in September? Offer them cash for keys to assist with moving and the costs of their new apartment. You could do some renovations with them there, but you will be turning their home into a job site. I doubt this will go over well.
Have you spoken to them about moving earlier than in September? Offer them cash for keys to assist with moving and the costs of their new apartment. You could do some renovations with them there, but you will be turning their home into a job site. I doubt this will go over well.
I have not. I guess the downside of them staying until September is having the money tied up until I could move onto the next property.
Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
2y
Start your renovations on the exterior now. Start marketing the place early. Communicate well with the current tenant about your plan. Perhaps they will be willing to stay on for increased rent. They might not even need to have the rehab done! I've had this happen with multiple units of apartment buildings. Sometimes a person doesn't want to move and they are willing to pay market rent. Then do the repair at some future date.
Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
2y
Hi Hai,
It would be a good idea to start on the rehab earlier and to also consider a way to get the tenants out earlier. It would also depend on how much the rent will increase after the lease. If rehabbing the property will significantly increase the value it would be worth escalating the rehab.
Seattle, WA · Member since 2019 · 21 posts · 9 votes
2y
Depending on your LTV position, you may be able to refinance now because you already have a tenant in place. Do you know if your tenant is paying market rent or is the current lease under market value?
Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
2y
Rehabbing before your tenant leaves in September could potentially lead to a higher refinance value and faster timeline, but it comes with challenges like coordinating with an occupied property and the risk of vacancy. On the other hand, waiting until after the tenant leaves allows for a smoother rehab process and reduces vacancy risk, but it may impact the immediate refinance value and timeline. If you're urgently seeking a lower monthly payment, rehabbing before might be tempting, but weigh it against the potential challenges. Minor cosmetic updates might be doable while the tenant is present, while extensive renovations are better suited for an empty property. A hot housing market might allow you to refinance without extensive rehab before the tenant leaves.