First time home buyers Duplex

[Chantelle Lewis]

My husband and I just purchased an owner-occupied duplex, and it’s completely vacant. We purchased in a desirable part of Los Angeles and got it for 200k under asking, so we already have some equity. Both units need a lot of cosmetic work/upgrades to get top rent. What is the best way to finance the renovations? We have some money saved, but we don’t think it will cover all the needed work and want to get the unit ready to rent out as soon as possible. We were thinking of doing a personal loan for renovations and then cash-out refinance in 6 months to pay back the personal loan. Pros/cons? Any recommendations for a better approach? 

[Kaylee Walterbach]

Hi @Chantelle Lewis! Congrats on your duplex.

Note that a cash-out refinance could mean getting a higher interest rate down the line (no one has a crystal ball, but they're still on the rise). You'll also have to pay closing costs (which could be ~3% of the loan). Depending on the loan, the market, etc., a refinance might not make sense 6 months into your rehab.

Have you looked into getting a HELOC? I've never done one personally, but if you have $200k in equity that may be your best option. Interest would be much lower than a personal loan.

[Christian Ehlers]

You could also see if you can do private financing for the renovations and then refinance afterwards if you have family or friends you can and are comfortable borrowing from. If not a HELOC is likely your best bet if you have a lot of equity!

[Kayla Gatmaitan]

Hi @Chantelle Lewis and congrats on your first duplex! As previously stated from others and with how the Feds continue to increase interest rates, I would suggest getting a HELOC/ HELOAN. Instead of refinancing and possibly getting a higher rate for the whole loan amount it would be beneficial for you to keep the lower rate on our existing loan. Then pull the equity you have and use that to renovate the property. If you think your renovations will cost more than what you can pull you can always find private money from family and friends to help you complete your renovations. If you have any questions about the different loan products you could use just dm me. Hope this helps!

[Rick Albert]

If the HELOC isn't an option (which I agree is probably the best way to go), you could explore the FHA 203(k) loan as a refinance. They will cover the new mortgage and give you the renovation needed. There are other options as well such as Homestyle Renovation Loans that could be explored.

[Jeff Schemmel]

there are quite a few home renovations stores that will offer 6 month or 12 month zero interest credit cards.  I would exhaust these before I took a loan.   Maybe this could be an option for some of the items on your list that you can buy at the same store.  I did this, myself, to help keep some cash in my pocket in the short-term.  Home Depot is a good place to start.