I am looking to buy a house in Beacon,NY and do some cosmetic renovations on it and rent it out. Would love some comments on this deal:
Purchase Price - 450k
Down payment - 5% (Since it will be primary)
Renovation costs - 75-90k (waiting for final bids but this should be the range)
ARV - 650k is the expectation
I am looking to keep this house for a few years and either rent it long term or just run airbnb on it. The good part about this deal is that there is an opportunity to build an ADU and a 2nd floor. That will help me rent out the ADU on airbnb and rent out one floor long term, converting it into a MF and with higher ARV.
However, that is a long term project and for now I am just looking at doing cosmetic renovations on the main house and not build anything.
Hi Vivian, others can speak to the numbers. On the tax side of your plan, two things worth setting up now while it's still your primary:
Make sure to keep every reno receipt. Cosmetic work on a primary isn't deductible, but it adds to basis, which lowers your gain later and sets your depreciation once it becomes a rental.
And watch the timing. If you move out and sell within 3 years, you can still take the Section 121 exclusion, up to $250K of gain tax-free. Holding past that window trades the exclusion for depreciation and cash flow, so worth deciding which path you want before the clock runs.