Buying in Souther California Questions

[Brandon Monaghan]

Hey! I am looking to buy a small property around SD. I want to then build a tiny house on the property. I am looking for something that has a good view (preferably water) and it can be 15-20 min away from the water.

1. If I am looking for a small property, around a 15,000 sqft to a half acre, how much am I looking at spending with having a view that I described above? 

2. How is the tiny house market out there? We are looking to build at most a 500sqft stationary home. My fiance and I both work online. She brings in 40k a year and I bring in 70k a year.

3. How bad are my taxes going to be out there vs. buying right outside of Denver? We are pretty frugal and good at saving so my only concern is getting taxed like crazy every year.

[Lee Ripma]

Hi @Brandon Monaghan,

I live in San Diego and had a very similar idea to yours in building a tiny house behind a house that already has at least one home but is under utilized for it's zoning. For example per the municipal code the lot is R-3 (could build 3 units) but it only currently has one house and a large backyard. I ran a ton of numbers using formulas I learned here on bigger pockets and did a ton of research. 

I'll summarize my extensive research on Tiny Houses and San Diego for you here: 

You can't have an RV within City Limits (checkout the City Limits, they are large) and nearby Cities have similar rules about RVs. So you need to be in Unincorporated areas to have any RV in your property, checkout where these areas are and you'll see they are lot further than you want to drive and very hot (lookup Dulzura and Potrero in google maps). A tiny house without a foundation counts as an RV or a house car. Note that as you go inland in SD it gets hot quickly! 

So, you need to actually build a tiny house with a foundation, hook-ups to water and sewer, basically everything you need to build a regular house. 

Now, this would be possible under my backyard R-3 zoning scenario above. So you could stick build  (slang for regular construction) the tiny house on site and would need to get inspections through the construction process, just like a regular house. You would need a site development permit from the City of San Diego, you would need to follow all the setback rules, etc. Building new houses on raw land San Diego takes a ton of work, time, and capital. I know because I help folks do one piece of developing raw land for a living. So the alternative is buy a modular home from somewhere like kithaus. You would still need to get all the hookups and pour a foundation BUT the house would be "pre-certified" by the State so inspections would be a breeze. You would also save a lot of time because the house can be built at the same time a foundation is being poured. Then the manufacturer installs the house on the foundation with a crane. 

The above modular path is what I determined I should do. 

So I set off to analyze parcels that this would work on. I ran analyses on parcels with a variety of configurations that I on found on the MLS. I did my analyses at list prices and deep discount rates to simulate off-market deals. My conclusion is that you need a lot of capital to fund your venture and your payoff time is a very long (like 20 years long). I'd be happy to share my detailed math with you should you have any interest.

You need to find a house that you can do this with that already has a house on it since due to the very extensive work required to develop raw land. Take a look at some of the sale prices on single family homes in the areas you were considering that could take another house. It is going very hard to find a lot with this potential at a price that is reasonable for your income but perhaps you have a lot of savings. 

Don't be deceived by rental prices, it is MUCH cheaper to rent than it is to buy in San Diego. Take a look at sold homes on Redfin to get an idea of prices in different areas. Take a look on BP and you'll see folks talking about how it is very hard to generate cash flow in San Diego. You can't even rent a home for your mortgage, let alone expenses. I know, I know, buy under market value. It's still tough. 

MY solution is that I have switched to the house-hacking idea of buying a tri or quad plex as this is far cheaper then adding tiny houses to lots and accomplishes the same thing, a small inexpensive place to live. Very hard to find for under 600k in up and coming areas but I'm continuing to look and explore different options. 

I hope this is helpful and best of luck to you! 

Lee