Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Andy Chen

Andy Chen has started 24 posts and replied 85 times.

Post: Financing Options after constructing 4 ADUs

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11

@Erik Estrada

I don't live there. $500k on a HELOC is the max number I have heard after talking to many conventional lenders.

The LTV is 50% now. Another challenge is the appraisal for the property after 4 ADUs. It will be hard to find comparable properties.

Can I use the projected rental income $8k/month like DSCR loan?

Post: Financing Options after constructing 4 ADUs

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11

@Jonathan Taylor Thank you. I got it now.

Post: Financing Options after constructing 4 ADUs

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11

@Jonathan Taylor. Thank you so much for your useful information and I am sure that you have a lot of experience and knowledge. I did not know "close ended registered second position" before and I will definitely do more research on it. Very excited about it.

I don't live there and it is under an investment property loan. 

I am happy to learn that the type is based on the zoning because mine is residential.

Post: Financing Options after constructing 4 ADUs

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11

Hi all, need your suggestions. 

I am planning to build 4 ADUs on my triplex. My primary mortgage rate is excellent and I definitely don't want to lose it.

Any suggestions to cash out refinance at fixed rate without losing the primary mortgage after construction?

I have looked into HELOC or HE loan, the max is only $500k. The added value (market value) from the ADUs would be around $1.5~2M and the total cost for the project is around 700K.

Note: After construction, it will be 7 units and it could fall under commercial loan.

I am hoping to do a 2nd loan to pay off the construction cost and cash out without losing the primary loan.

Any suggestions? Thanks in advance.

Post: Steps for dividing the lot with properties

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11
Quote from @Ronsted Yuag:

I just wanted to share what my mortgage bank told me as I have the same plan. They said they can work with the city/township to facilitate the process. Hope that helps. 

@Ronsted Yuagthanks for sharing. Do you mean the process for subdividing the lot or getting the permit? 

Post: Steps for dividing the lot with properties

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11
Quote from @Matt Devincenzo:

@Andy Chen I'd be glad to help with an overview of the process. @Dan H. reply's above are spot on as far as SB9/SB10, ADUs and issues related to easements etc. 

First a question, you say you want to achieve the two buildings on separate parcels; why? What is the specific benefit for you with them being separate parcels? There's generally multiple ways to achieve an outcome, so understanding the why can help with the how.

There are two 'buckets' in development, what you are doing now with getting a 'by right' building permit is ministerial. Ministerial permits are just reviewed and approved once you've met any technical considerations. A subdivision (lot split) is in and of itself ministerial, but it relies on a prior discretionary approval. These discretionary approvals are the second development bucket...when talking to clients I tell them these are things like variances, rezones and master planned communities etc. This also applies to subdivisions in the form of a 'Tentative Map', and unfortunately in the State of CA this applies to subdivisions of less than four parcels....every other State I am aware of it only applies to 5+ parcels. That was essentially what SB9 attempted (poorly) to address; your ability to relatively easily subdivide a 2-4 lot subdivision.

So the process is to first submit for a 'Tentative Map' and get that approved. During this you will address technical issues and guidelines, as well as go to the local community members for their review and input. Their input is advisory only and will not make or break a project, but certain groups will rally to oppose what they deem a bad project...today it isn't uncommon to have both a pro and an opposed contingent of neighbors there turning your project into their personal battle over wanting both more and less density...once you get through this you will end up going to a hearing where your project is voted on...again people can come and weigh in, and if they do not like the decision can even appeal your decision as high as the City Council. 

The second part is assuming you are approved, you now need to begin working on your 'ministerial' items...your map, permits to address issues, paying fees for affordable housing etc. If you get your building permits first, then many of these may have already been taken care of, but there will still be some you need to address. 

In CA, especially for small projects like this, it is not common to have an attorney involved at all. Your surveyor can do the entire process, possibly with the support of a Civil and Architect if you get into more of the site plan and design components. What is most critical is to hire the consultant team that are local experts on the code. That is really the function the attorney could support is the code review, but if your Civil/Arch have the same experience then the attorney is just doing the same job twice. For what you describe it will likely be required to combine a few code sections to achieve your outcome. City staff will simply tell you what does and doesn't work, not point out additional ways to achieve your goal.

I will say that what you outline will be a more challenging project than some others for a couple reasons, one of which is that you want to create a lot without frontage on a public street. It is do-able, but does come with an additional approval process. Another is because this is MFR and not SFR some of the newer development incentives aren't available, so you won't have them at your disposal. But there are some others that you will have since it is MFR. Overall based on limited info I'd estimate you should be ready to spend around $100K for the entitlement process and probably an additional $50K for the final mapping and permits.

@Matt Devincenzo, Hi Matt, thank you SO much for the detailed overview of the process. I will definitely save it.

You asked a great question. Why do I want to subdivide the lot? I agree with you, there generally are multiple ways to solve the problem and this is one of the direction I am exploring.

The challenge is that I have a great mortgage rate (30 yrs fixed) on the triplex. By adding 4 ADUs in the back, I am creating more equity. I want to be able to cash out without losing the mortgage on the triplex. I was looking into construction loan but they all want to turn to permanent loan for 7 units after construction. Almost all lenders want to be the 1st position. I get it. So I most likely am going to use HELOC for construction.

I was advised that there is a chance to subdivide the lot so the new 4 units can be on its own and then I can apply a new mortgage on it without losing the existing mortgage.

Another option I am going to explore is that since there will be equity after construction, there should be a chance for a lender willing to be on the 2nd position. e.g. home equity loan.

By your estimate, subdivision is not easy also costly. Not sure it is worth doing it.

Post: Steps for dividing the lot with properties

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11
Thank you. Hope @Matt Devincenzo can shed some lights. 

Post: Steps for dividing the lot with properties

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11
Quote from @Dan H.:

Some questions:

- Is the 2nd unit that you currently have permit an ADU or is the lot zoned MF? I suspect you currently have a permit to add an ADU.

- Are you planning on leveraging SB10 for this lot split?  It is my belief that if you are planning on leveraging SB10, your only chance for it in the near term is in city of San Diego.  Any other city or the county in San Diego county and you are likely years away.

- I would check the easement wording.  It may only entitle the one existing lot to use the easement.  I have an easement on my property and so far have successfully stopped a lot split (not using SB10) because the easement on my property does not allow for additional lots to use the easement (just the 4 existing lots).  I guess they can split the lot, but would not have a means to get to the lot seeing the new lot would not have an easement access.

- Not sure if you diagram is close to scale, but if it is close to scale it looks tight.  I suspect your permit already has allocated for requrired setbacks.  If you are in a transit zone, parking is not required.

As for your question #2, if it is an ADU I do not believe you will be able to split the lot after the fact. If your current permit is an ADU, I suspect it will need to not be an ADU to split the lot as you have depicted. You likely would want to split lot first (possibly via SB10), then build your new Unit(s) (SB10 would allow up to 2 units/lot). The person on this site that I believe is most knowledgeable about unit requirement issues for So Cal is @Matt Devincenzo. Take what he states over what I state (he is far more knowledgeable in this area than I am).

Good luck

Hi @Dan H. thank you so much for your inputs and questions.  (BTW. I am very close to Poway) I am in 4s/Del Sur. Please see my response below

(1) The lot is in City of San Diego and it is currently a triplex and I am adding 4 units to the back side. I obtained the permit of 2 ADUs last December but we decided to build 4 at once. The lot is fortunately on a special zoning. I don't have to use SB10.

(2) The easement only says the shared driveway is shared responsibility. I checked the when purchasing few years back but I will check again.

(3) The diagram is not close to scale. The space between two structures can easily fit 3 cars (not truck) and it still has space on both sides. The permit was issued and the setbacks were already taken into considerations.

(4) They are ADUs. I need to do more research and consult with City too. Not sure if we can split after adding ADUs. BTW, when you say 2 units/lot, is that the rule for SB9?

Thank you so much for your inputs and direction. I will connect with Matt. 

Post: Steps for dividing the lot with properties

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11
Quote from @Chris Seveney:

In this case the property as of right allowed for two residences. typically a single lot cannot have two residences on it and the jurisdiction will require it be subdivided prior to building.


 Got it. Thanks. The lot/zoning does allow multiple structures. 

Post: Steps for dividing the lot with properties

Andy ChenPosted
  • Rental Property Investor
  • San Diego, CA
  • Posts 85
  • Votes 11
Quote from @Chris Seveney:

1. Speak with the county first. you need to confirm you can split the lot

2. You will not get a building permit until the lot is split and you have separated the lots and done a site plan

3. Land Use attorney is what you need and a civil engineer

 Hi @Chris Seveney thanks for the reply and very helpful. About #2, can you explain why I will not get a building permit until the lot is split? or this is a suggestion?

I actually had the permit issued last December but we are in the process of submitting a plan change to add more units.

Can you elaborate? Thanks