Los Angeles ADU House Hack

[James Bianco]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $835,000
Cash invested: $197,000

House Hack. Purchased a 3-2 single-family home with a permitted 2-1 ADU in Van Nuys, CA with conventional financing (20%) and added about $30k in repairs/upgrades/landscaping. I am currently living in the ADU and am renting out the main house. Mortgage is $3,099.00 and I am currently renting the main house for $3,200.00.

What made you interested in investing in this type of deal?

I work in music for film and television, and unfortunately still need to live in Los Angeles for the foreseeable future (though that my change). My goal has been to lower and stabilize my living expenses in LA, while owning an asset that will hopefully continue to appreciate.

How did you find this deal and how did you negotiate it?

Found it on the MLS. Didn't really negotiate it as I bought it slightly above listing (common for the LA market). It did appraise slightly higher at $840k though.

How did you finance this deal?

Conventional financing, 20% down.

How did you add value to the deal?

I repainted the interiors, landscaped the yard with drought resistant plants and a drip system, reconfigured the fencing to separate the two units for better privacy and yard space for both, and added a concrete deck for the ADU.

What was the outcome?

I am currently living in the ADU and renting the main house for $3,200/month which covers my mortgage. I'm now just paying about $1k for my taxes and insurance (including super expensive earthquake and umbrella liability policy) which are essentially my living expenses. I'm immediately saving about $700/mo and am working to save more so I can buy CASH FLOWING assets out of state.

Lessons learned? Challenges?

The LA market is stupidly expensive. It took me over a year to find this property that already had the permitted ADU in place. This property was pretty much turnkey, so I did pay a higher price. I made offers on two other similar properties previously, and they were bought for more than 15-20% higher than listing! However, I am not convinced that buying a much cheaper property and manually converting the garage or building an ADU from scratch would have saved me much $$$ ultimately.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Craig Van Skaik at Preferred Lending Group who is an absolutely rockstar of a loan broker, and helped me secure great 30-year fixed rate. My RE agent was Justin Smith of Berkshire Hathaway, and he was also a rockstar in helping me secure this deal.