Hello group. I'm new to investing. I've been approved for my loans and I've set myself a goal of purchasing a fourplex with the help of California first time buyer programs. My question is: I'm really having a hard time finding a deal that makes since and cash flows in this market. I'm a GC and electrician by trade so I'm planning on staying in one unit, completely upgrading it and move on to the next units. I'll have a tenant moved into the newly renovated & Increase rent. I'm giving myself 3 months per unit. I'm not sure if I should use my own capital (cash and/or credit cards) or get a HELOC. Any advice? Any better strategies? Exit plan ideas?
Rental Property Investor · Long Beach, CA · Member since 2019 · 145 posts · 49 votes
6y
Great idea Barbie but I would purchase a 3-4 BR SFR (with a detached large garage) that has the capability of spawning a JADU from one of the bedrooms bathrooms and converting the garage into an ADU. Plenty of opportunity to capitalize on his skills yet saving a fortune by passing on new construction. Even better, however, if someone has gone to the expense of building/converting into an ADU, and willing to sell for the low appraised value that SFR's with an ADU generate I'd certainly be interested in that, as long as the SFR is capable of easily converting a bed/bath into a JADU. The cash flow generated would be awesome but the value less so.
Real Estate Agent · FRESNO, CA · Member since 2016 · 60 posts · 42 votes
6y
Especially with your skills, have you considered either updating a property with an existing ADU or purchasing a SFR and then triplexing it? You could turn the garage into a JADU, and build a detached ADU in the back all while you live in the SFR.
Rental Property Investor · Long Beach, CA · Member since 2019 · 145 posts · 49 votes
6y
Great idea Barbie but I would purchase a 3-4 BR SFR (with a detached large garage) that has the capability of spawning a JADU from one of the bedrooms bathrooms and converting the garage into an ADU. Plenty of opportunity to capitalize on his skills yet saving a fortune by passing on new construction. Even better, however, if someone has gone to the expense of building/converting into an ADU, and willing to sell for the low appraised value that SFR's with an ADU generate I'd certainly be interested in that, as long as the SFR is capable of easily converting a bed/bath into a JADU. The cash flow generated would be awesome but the value less so.
Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
6y
It will be interesting to see how much ADU's will increase home values. ADU's should help buyer finance more of a property since the rent can offset debt expense.
Real Estate Agent · FRESNO, CA · Member since 2016 · 60 posts · 42 votes
6y
@John A Murray That's definitely the most inexpensive way to do it, although you'd have to weigh the loss of rent from changing a 3 Bedroom to a 2 bedroom home, and you'd have to find a layout where the bedroom is large enough to accommodate an efficiency kitchen.
Pre existing ADUs are still to be found in my area, and I come across ones on the MLS that are "hush" units and aren't mentioned because they lack permits. Those types are now allowed to be grandfathered in and can be a good bargain.
They may not be allowed in your area, but THOWs here are counted as ADUs. These are great because all you need to do is tie into utilities and park the unit. If CA decides in five years to take back the non-owner occupancy requirement, all you'd have to do is move the unit elsewhere to rent.
No matter which way you approach it though, like you said ADUs cash flow really well, but don't plan on getting the equity out of it for a while.