A few months ago, the duplex next door went on the market. It's not a looker, so we didn't think much of it. Allow me to elaborate...
The roof is a rusted disaster:
The front stoop is disintegrating:
The backyard is a jungle:
There are some super questionable cracks in the foundation:
So, why the H E double hockey sticks would we even consider purchasing it? Hear us out.
Over the past few months, we have been talking about the pros and cons of staying in our current property for another year. Originally, our plan was to live here for one year. During the year, we would recoup our financial investment in the Airbnb, fulfill our one-year obligation to live in the property for owner-occupied financing, and avoid winter in the Midwest.
Well, then the following occurred to us...
Airbnb has given us SO MUCH financial freedom. Our mortgage/taxes/insurance is ~$3,200 a month here. Look at our February calendar on VRBO. Green shows VRBO bookings and purple indicates the unit is booked through Airbnb. Because this is the VRBO calendar, you only see those prices, but even with those bookings you can see that Airbnb more than covers our mortgage.
We LOVE Charleston. The climate and giant list of things to do are invigorating. There are people who love the winter and people who do not. We are the latter. We wondered if we would miss the snow this year, and honestly not even one tiny bit of me did. Our family unit is much happier when we can be outside together, even if when it is cool and rainy in February. In addition to the weather, I think we've honed in on the fact we are CITY people. The energy in city-life puts pep in our steps - it's what we loved so much about Chicago and San Francisco. While we are pretty "go, go, go" people, we also enjoy "home time", as Emmy lovingly calls it. So, Charleston is a great happy medium. It feels like both a small and big city at the same time.
So, while mulling over all of these things, we kept coming back to the idea of this duplex next door. With all negatives above (probable water damage, termites, foundation issues, etc.) what were some of the positive attributes?
It's a duplex. We could live in the upstairs unit and rent out the bottom unit as an Airbnb or a long-term rental.
The price. The property is listed for $550,000. Duplexes that are updated sell for 900K+. This provides a lot of interesting opportunities. (More below...)
Location. It is LITERALLY next door. We are purchasing the property as an investment property (25% down), but once we complete renovations, we can move in and refinance the property as owner-occupied. Because an owner occupied property will only require 15% down, we will recoup 10% of the money we put down PLUS however much the property is appraised at post-renovations. Of course it depends on how much we put into the renovations, but this could be huge. Like I said, many duplexes sell for 900K+. Another notable perk about the property being next door is moving -- we can truly have movers carry our things from one place to the other without a truck or anything.
It has a backyard. Welcome to the jungle! Yes, the jungle is insane, but we could do a few things with it. 1.) We could overhaul the backyard and turn it into a small parking lot. This would allow us to obtain an Airbnb permit, because in Charleston you must have 3 maneuverable parking spaces. OR 2.) We could landscape the backyard for our own private use. If we did this, we could rent out the first floor unit to long-term renters (MUSC students) instead of using the first floor unit for Airbnb.
So, all of these potential perks got us excited and we decided we would tour the property! Well, wouldn't you know, the day we toured it the owner dropped the price 50K. We put in an offer, and we're under contract. Next up: the inspection. This will help us to figure out what all the property actually needs to increase its value.
Big thanks to our awesome realtors Lexi and Joel at JDM Properties. If you're in Charleston and in the market, they hustle so hard and truly are THE BEST.