What To do With 1st Investment Property-- Opinions / Advice?

Question

Hi All

I'm writing because I bought a property in Oakland last year with an FHA loan that includes 2 building on one parcel / title: one is a single family 2 bedroom, 1 bath with a huge unfinished garage (essentially 3 cars deep), and one is a triplex, and the 2 buildings are connected by a small back yard.

The triplex is currently fully rented out at $4,250 per month in rents (essentially market rates)

And I'm currently living in the single family.

I write both to seek advice / opinions on what to do with the property, as well as potentially get a reference for a real estate attorney to help.

My goal is to get them cash flowing as much as possible, as well as increase my equity.

My plan would be to get a lawyer to help subdivide the buildings into 2 titles, and then get a conventional loan for the triplex and a fannie mae homestyle loan for the single family, and use it to get additional funds needed to convert the unfinished garage into a 1 bedroom unit and then rent that out, and move out of the top unit and rent it out.

The thinking behind the sub-division being that the 2 buildings separate are worth more than the 2 on one title.

And the thinking behind the fannie mae homestyle loan for the other unit being that I want one more door and I want to use someone else's money to build that additional unit.

Thoughts?

Advice?

Matt K. · Answer

https://www.oaklandca.gov/reso...

I think you could even convert the garage of the single family into an adu...and again Oakland seems to like ADUs

https://www.oaklandca.gov/topi...

Now money wise...I've been on a HELOC kick, understand the risk and know that it's a tool...but I love the fact that I can recycle the credit like over and over as I pay it down vs a traditional mortgage.

Andrew Garcia · Answer

Hi @Teddy Smith, the subdivision could be a costly and time-consuming practice. Especially if the area is not zoned for multi-family.

If you were to do it, the conventional for the triplex and Fannie Mae Homestyle would be a great way to get the garage apartment completed. Those loans do come with higher rates so be aware of that.

Ori Skloot · Answer

Assuming that you have enough land for each building to qualify for a lot split, this very well could be a good plan. You're looking at 15-20k and about 8-12 months to get through the entire process, so keep that in mind. There are a few good companies in the Bay Area that specialize in lot splits. First thing you need to do is get a tentative parcel map which costs around $7500

Joshua Janus · Answer

I would get the highest rents out of both properties as possible then put them on the market. In this climate, you can get a pretty penny on properties that bring in income.

Osazee Edebiri · Answer

Hi @Teddy Smith

I looked at Subdividing one of my properties back in 2017 and the costs are very high. It was more than $25k just for the metering.

If your goal is to maximize cash flow of this specific property definitely focusing on the garage conversion is the way to go.

What I recommend is talking to a lender to see what other options you have aside from the parcel split loan conversion. A good one will probably advise you of the payment difference you will see since the rates are now higher than when you bought your home. Our preferred lenders at The One Brokerage have talked about hybrid loans, basically taking on a second so you do completely loose the grate rate you have.

What To do With 1st Investment Property-- Opinions / Advice?

What To do With 1st Investment Property-- Opinions / Advice?

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