All Forum Posts by: Andrew Aladjadjian

@JT Goodwin

This will be a big help learning how a particular city is implementing the new laws. thank you for sharing!

@Nathan Vaughan

Hi and welcome!

I love your plan and believe you should see it through. As stated the new CA laws regarding ADU's are now investor-friendly. One way to learn more about ADU's is to read through the bill (AB-68) which has now taken effect. I would recommend splitting part of the main dwelling into a JADU (up to 500 sqft. as that is the maximum allowed for JADU), then you can build a new ADU up to 1200 sqft.(this is the largest you can build) or convert an existing detached garage (this would be less costly than a new build but the rental return would be less). If you have an attached garage I would recommend converting that garage into the JADU (JADU has to be a part/attached to the main dwelling.) Every city has its own regulations as well. Speak to the city housing department regarding your plans.

Hope this helps.

@Erik Joseph

I believe you will have some trouble finding a lender who will lend a HELOC on an investment property. HELOC's are much more common on primary residence properties. Although a HELOC gives better flexibility, a cash-out loan will give you the stability of a fixed rate, and may be a lower rate than the HELOC.

Is the HELOC you currently have on your primary or investment property?

@Ben Chow

I wish the law allowed you to convert the garage to a JADU, that would make things much easier. But this is as I feared, you must first make plans and expand the home, and simultaneously request that part of the addition be used as the JADU only after approval of the expansion. This is fine, however it will take the city MUCH longer to review and approve your permits. 

@Cody Mau

Hi and welcome! If you do not currently own any real estate you will qualify for an FHA first-time buyer loan and purchase a home with only 3.5% down payment. As Jason Hsiao mentioned I would then house hack and rent out as many rooms in the home as possible, and possibly creating more rooms by getting creative. This will allow you to not only buy in an expensive market, but also to cover you living expenses. After one year you can repeat this process, and rents will likely be higher which will allow you to fully rent out that home and purchase another as a primary residence.

@Ben Chow

It seems the city and its employees are still working to implement and impose the new laws. Please let us know when you receive a response.

Hi Alan,

Per San Diego City laws, this particular zoning allows for one dwelling unit per 3000 Sqft. of land. (This is not regarding ADU's, just a side note)

Since the new ADU laws have only recently taken effect, each city needs to implement their current laws to meet the guidelines, however each city is still allowed to impose certain requirements of their own. Per the new state laws, you technically are allowed to build an ADU on a multi-family property given you meet certain requirements. I would recommend calling or visiting the city zoning office and asking them directly.

If you have space to build a new ADU in the lot then that is a great idea to cover you living expenses.

Hi Erik,

One good point is that current interest rates are very low (under 4% if owner occupied). If you are planning to do a cashout refi on the properties you own, you will have very favorable terms in my opinion (even if not owner occupied). 

The way I look at putting a low down payment on rental properties is that your bottom line will be less because your monthly payment will be higher. Given all the risks with rental properties (vacancy, repairs, etc.) it is always better to have a lower payment amount to mitigate. Due to high prices in Los Angeles, many times you will not have a positive cashflow unless you do at least 20%-25% down payment.

It seems like your goal is to gain appreciation in the long term. Yes, you want to add more doors to your portfolio however you are borrowing money to do so, thus lowering the cashflow on the other doors. In this case I would not mind putting a large down payment since you are playing the long game, and with risks growing everyday of a sell-off or bubble, you will be able to CYA in the worst scenario.

In order to accept tenants receiving Section 8 vouchers you must first apply with the local public housing agency. There are a few steps involved but believe me the state is in need of all the affordable housing it can get. The only way I see you being denied is if the property does not pass the physical inspection, which simply requires a clean home with no safety or health risks. You then complete a contract like any other rental, however Section 8 has the final word on the actual rental amount (approx. average market value for the area). You may then request rent increase annually under LA county rent control laws and they are very likely to approve. 

Hi Ben,

Per the new ADU laws of California, owner occupancy is no longer required until after 2025. You may purchase a home, build an ADU, and rent both units.

Yes, there are new rent-control laws in CA however it does not necessarily hurt investors. For example if you purchase an SFR and it is vacant, and you also build an ADU, you can impose any dollar amount for rent. Then you may raise said rent up to 5% PLUS inflation which gives you another 2-3%. If you collect $3000/mo then you can add at least $150(5%)/mo the following year. If you want to evict someone then you will have to pay for moving costs and about a month's rent, but choosing the right tenant is another conversation. Section 8 pays 80% in rent guaranteed (remaining is due by tenant). Please let me know if you would like to chat or meet as I also live in Los Angeles.