House Hacking in San Diego

[Ryan Knapp]

Hey BP, 

My wife and I have been attempting to luxury house hack (add an ADU onto SFR) in my hometown and are feeling a little worn down. I've read quite a few BP books and believe it's a strategy that works. I want to provide a tangible path to advancement for my wife and little 6 month old. We both work full time and don't make a ton. We've been approved for a 420k FHA loan, VERY entry level for SD.

The last house we put an offer on we were essentially ghosted by the selling agent after his loan officer called to "cross check" our loan and I didn't bite on switching over to his non-FHA loan product. We've looked at 20ish homes in person, I analyze and check the MLS and real estate apps every day (hourly, honestly) and we've been looking for four months or so. In this time we've only found two homes that would potentially work and we put offers on.

It's hard to put my wife through the emotional toll of looking at so many properties and getting our hopes up to find out it won't work. I'm beginning to wonder if I should continue or if it's just foolish to put my family through the ups and downs. Don't want to quit of be a quitter, but am trying to be wise and realistic. 

Have some question's that I need some advice on...

-What's a realistic number of homes to put offers on before finding something when you're very entry level in the market? 

-Do agents discriminate against FHA loans? Is it a loan product that's worked for other to house-hack with at the lower end of the market?

-What's a better way to find FHA approved style deals?

-Do most agents play games or are they being honest when they tell us they "Have multiple offers and more to come, so please get your's in soon"?

-Any creative strategies for funding ADUs? Or specific loans?

-What are some way besides offering more to make our offers more appealing?

-What's a realistic amount under asking to offer in a hot market like SD?

Best, 

Ryan

[Dan H.]

My view is the San Diego market has cooled significantly in the last 2 years but the entry level is the hottest segment.  

I do not think 20ish homes is a lot to have looked at for the home you want to purchase to live in.  We probably physically viewed 3 to 4 times that when we purchased the home that we are living in (full market offer).  Even for our investment properties we probably physically look at more than that for each offer we submit.  Our actual close on offers is maybe 1 out of 10.  So we may look at maybe 200 properties for each close.  

The sellers agent’s job is to sell the RE for top dollar.  If you remember this, you will realize that many will “play games” to achieve that goal.  If the numbers work, they work and if they do not then they do not.  I have submitted an offer at 20% below ask and have gotten it accepted.   I offered what I was willing to pay for it.   

I have had seller’s agent come back with best and final and have resubmitted same offer and got the offer accepted.  I was tempted to lower my offer as I questioned if agent was trying to have me bid against myself and do not like those games.  

Do I think some sellers would rather have other options other than FHA? Of course. Most sellers want to minimize hurdles. They likely would desire all cash, no contingency offers but unless they are significantly below market that will not regularly happen.

There are many reasons for being ghosted by seller’s agent   I once offered $20k over ask on an RE I wanted.  Nothing out of the ordinary about my offer (no strange contingencies or anything).  Agent definitely got my offer.  Never got a counter.  I am confident that I would have been highest offer if given a chance as I would have gone $80k over ask (over 10% above ask).  In addition, I could have come all cash.  I just needed sellers agent to communicate what was needed for me to purchase the property.  Not a peep.  It sold for $5k more than my initial offer.  My agent believed the other agent had a buyer and may have preferred not to have gotten my offer.

by the way, I believe at your price point you can purchase an RE with an ADU for less than you can purchase one without and place your own ADU. my ex-protege (now competitor) has a property for sell that has 1 BR detached ADU. the base home would sell for in the low $400k. He is asking low $500k (I think it is $520k with the ADU). I do not believe that ADU could be built for $100k. it is fairly nice 1 BR (laundry room, granite counters throughout, etc). It does have a weird entry, entry is through the BR. If it was my property I would change the entry.

Do not get frustrated.  Good luck