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House Hacking/ seller financing a 3 unit $1.9 Million dollar home

Christian Romero
Posted

Hello Everyone! 

Trusting I will find someone who shares a similar experience. There is a triplex property (4/3 main house, 2 individual units 3/1 unit, and 2/1 unit towards the back of the property) and 3 units sitting on a spacious and buildable 0.71-acre lot. It's been on the market for over 1 year sitting at $1.99m while the owners aren't in any rush to sell due to personal health conditions and squatting tenants. Would this be a house hack scenario; cash for keys to tenants in both back units, seller financing living in and renting per room? How would I structure a deal like this assuming the owners are accepting of replacing their former tenants with future owners of the property? I also plan on developing an ADU to permit 2 + beds 1 bath unit and community improvements such as installing solar panels, specified parking areas, common areas, a community garden (for tenants only), and rehabbing each unit to force appreciation.

If you need more details please connect to elaborate. This is a huge opportunity for my family's expansion and their first real estate investment. I'd love to hear what you have to say & learn how to navigate an opportunity like this. 

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Stephen DeThample
Agent
  • Real Estate Agent
  • Las Vegas, NV
294
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436
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Stephen DeThample
Agent
  • Real Estate Agent
  • Las Vegas, NV
Replied

Start talking to lenders first. 

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Rick Albert#2 House Hacking Contributor
  • Real Estate Agent
  • Los Angeles, CA
1,280
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1,770
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Rick Albert#2 House Hacking Contributor
  • Real Estate Agent
  • Los Angeles, CA
Replied

Cash for Keys (C4K) can be extremely costly, time consuming, and risky. You need the units vacant before moving in. The only exception is if you have experience.

The C4K will likely start around $20K per unit. 

You will also need to see if they have a loan on the property and how much you would be putting down. 

Every case is different. Have you spoken with the Seller on the option of Seller financing? 

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Jonathan Taylor
  • Lender
  • Los Angeles, CA
644
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Jonathan Taylor
  • Lender
  • Los Angeles, CA
Replied

@Christian Romero A few points first.

Cash for keys in LA county is not as easy as other states. You have to follow HCIDLA's guidelines and the current cost is 23k+ per person (not tenant). Even if the tenant signs the CFK document and sets a time to move out, if they dont, you have no ability to enforce the contract. Its a tenant free for all state. Keep that in mind

Second, this is a house hack scenario but some of your intended plans are over developing without ROI. ADU, parking, common area - good idea, Garden and solar, not so much.  Since tenants pay for utilities, no sense in adding solar cost when you wont see a return. I tried tenant gardens on my house hack and it cost me (tenants leaving water on, attracting wild animals, wasn't taken care of, list goes on)

Lastly, what is your plan for funding? This is a huge endeavor (if you can get it under contract and tenants out) to do in LA. If you do not own any real estate, Look into the NACA loan program. I used it to buy my triplex + ADU.