All Forum Posts by: Austin N.

@Zachary Moore Did you ever find a good software solution? I am looking to do some planning for a potential ADU.

I am purchasing a property that is currently using a permitted corner(bedroom) of the house as a studio (LA county). The space has its own entrance, bathroom, and kitchen/sink area, and doors to the main house are covered with cabinets. 

I am considering putting in a mini stove, or hot plate in the area to make it more desirable for prospective tenants. My main concerns are legality and insurability. From my reading of building codes it would not be allowed to add a stove, and they likely wouldn't let me add gas/220v connections for such stove, so the actual value will not increase. However, from an insurance POV it appears that my provider (state farm) will still cover fire incidents from an unpermitted stove. 

Are there any gotchas I am not considering?

Those of you renting small studios (~350 sqft), are ranges/stoves/ovens a deciding factor? Or would a small plug-in hot plate suffice? Worth the investment?

Thanks!

Austin 

I was recently discussing this with an insurance broker. It depends on the company, I recently went with Statefarm and they said they DO cover non-permitted units. I would call a few insurance providers to double check and ask about your property specifically, it might vary by county, construction type, etc.

Thank you for the replies @Jon Schwartz and @Joyce Tavares! Given the property is zoned R2, my best option going forward will be to expand and covert it to an ADU. Since the structure was built 50+ years ago, it will likely need some heavy code updates.

Hello BP! I am currently analyzing a "duplex" in Los Angeles County that has a main house, free standing second unit, and free standing rumpus room (with bath). From my research and discussions with the city, all of it is permitted. The current owners are living in the front house (which they blocked off a door and are renting a big room as a "studio" with separate entrance), renting the second unit, and renting out the rumpus room. In total, 4 rentable areas.

Is it legal to rent out a legally permitted rumpus room?

If so, if the tenant stops paying and I need to evict, will there be any issues getting occupancy/back rent?

For the front house, is it legal to cover a door (with cabinets) and rent out a portion of the house? Appears to be the same as "renting by the room"

Thanks!

Hello BP! I am currently in escrow on a duplex in LA County. It consists of a front house, and a back unit attached to an unfinished garage (all built in 1930s). The listing/ LA county assessor lists the back unit at. ~650 sqft. However, I recently inspected the property and its 350 sqft at most. All work has been permitted and I have confirmed with the city. Conveniently, if you were to add the garage sqftage to the back unit, it would be right around the claimed sqftage (~650). 

Is it possible the unfinished garage was incorrectly added to the sqftage? What would be the process for fixing this (if I should)? Anything else to worry about? If it matters, I am looking into converting the garage to an ADU.

Thanks!

Austin

Hello BP!

I am looking for everyone's favorite books or resources on learning real estate development. I have experience buying distressed duplex/tri/four, renovating, and holding long term, but would like to learn more about the development strategy. I see land for-sale around me often (Southern California) and would like to be able to analyze the ability to develop land and/or build SFR through small multi-family profitably. I am on the forums often, but if you know of any good development deal diaries I will take those too!

I checked the top 100 largest cities (by population) and divided the Zillow Rental Index (ZRI) by the Zillow House Value Index (ZHVI) to get the average rent/price ratio. 

Top 5 Cities with Highest Rent/Price

Top 5 Cities with Lowest Rent/Price

As Scott has mentioned, these results are skewed by local labor costs, property tax, insurance costs, and vacancy. It also doesn't take into account the distribution of class within a city (A, B, C) or unit type (SFR, MF, Condo). If anyone is curious about a specific location or has any questions feel free to reach out!

Looking forward to seeing your polished analysis @Scott Trench!

@Chris Fi: Looks good to me! Instead of using a flat 1200/unit/yr you could breakdown major capex with regard to remaining life and make sure the reserves grow fast enough to reach demand.

From my research, it appears that a single individual can write-off $25k in passive losses for non-real estate professionals if their AGI is less than $100k. This benefit is phased out to 0 as income reaches $150k. I was expecting to see this $25k and $100k limits doubled for couples married filing jointly (50/200), but it seems like it remains $25k/$100k.

If my understanding is correct, there are two ways a couple (John and Jane) who own real estate can proceed.

*John and Jane both have ~AGI of $75k

Situation 1:

John is single and has $25k in RE losses, since his AGI is <$100k, he can offset his income with the $25k in losses.

Jane is in the same situation as John.

Combined write off: $50k

Situation 2:

John and Jane get married, and file Married jointly. Their combined AGI is $150k, and have $50k in passive RE losses. Since they have reached the $150k AGI they cannot write off any passive losses. 

Combined write off: $0

Is my understanding of this correct? If so, John and Jane should have a ceremony and not file any paperwork!