Greetings all,
I am considering cashout refinancing my primary residence SFH so I can use the money to convert the 3rd floor into a unit I could live in for free or close to free.
My financial situation:
- Not married, under 30.
~38k in retirement accounts
~10k in cash on hand
- I own a reliable used vehicle
- Decent career in IT making 80-100k/year (w2 contracting, employed 8-12 months per year)
- No student loans or credit card debt
Details of primary residence:
- bought for 280k in 2016
- currently owe ~250k @3.5% fixed
- Market value is 330-360k (gentrifying neighborhood)
- ~3000sqft (2 floors 100% finished, 3rd floor is has some rough drywall and subfloor, but mostly finished)
I want to take refinance my house and take the extra money to renovate my 3rd floor and turn the house into a multifamily. I would plan on living in the added unit for at least a few years. I think it will take between 30-40k to do all the necessary renovations to turn the 3rd floor into a nice unit. This would involve plumbing a new stack to the 3rd floor (~15k), adding a huge deck to the back of the house so I could have access to the unit (~12k), and finishing out the living space on 3rd floor with appliances and flooring (~15k?).
I could rent out the 1st and 2nd floor for between $2200-$2600, and I estimate my monthly payment on the new 300k mortgage would be ~$2100. The utility costs average about $400, so the house would basically cost $2500/month to cashflow all utilities/taxes/insurance/etc.
If I had the additional 3rd floor unit totally finished and I moved out of the house, I could rent it for ~$1,200/month bringing my total monthly take to ~$3500/month, while having total housing costs @$2500/month.
Mustachians, does this sound like a good idea? Has anyone here done something similar?