All Forum Posts by: Baird King

Many thanks @Dan H.!  We are so happy with the situation and already searching hard for the next spot (working on an offer as we "speak").  

@Dan H. - thanks for the explanation. I think I understand most of your points. The 50% rule seems very conservative, but I understand why it is important to shoot for it as a goal throughout one's investing career. Given how hard it is to get into the market in Santa Barbara, we were happy to get something that even covered expenses at first. All the realtors I talk to in Santa Barbara say that most investors are in the negative for a few years if they purchase off the MLS. Definitely more of the long-game. Our goal is to start generating solid off-market leads with a higher potential to cashflow out the gate, but for now I am just so happy we got into the game as smoothly as we did (keeping fingers crossed). We are trying to mitigate the risk of vacancy and significant operating expenses by taking extra care in the property management. We worked very hard to find a good tenant (amazes me how casual some investors treat this), and have the background to do much of the maintenance/repairs ourselves. Honestly I wouldn't have it any other way for our first deal as I want to become intimately familiar with all parts of the project. Really appreciate your insight! What is your market? Do you own in IV? Or were you just saying you understand the SB market because of your Son with his rent? Santa Barbara is a crazy market as a whole, but IV is on another level. I guess that is true with all college towns, but put a college town on a cliff over the ocean????? Hard to imagine a crazier housing situation. Hope he is enjoying UCSB!

Hi Dan. Thanks for your post! Hoping you can clarify that for me. My NOI figure was based on total monthly income of $5,600, minus PITI of $3,400, minus expenses of $400 leading to a cashflow of $1,800 (all approximate). Am I missing something?

Hey guys. I'm very interested!  I am tied up the next two weeks.  How about putting something together for mid-April?  Looking forward to meeting some more SB investors!  Excited about real in-person interaction, so a beer would be fun; but also up for a Zoom so we can get Jennifer involved.  

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $860,000
Cash invested: $50,000

Converted detached bedroom into permitted ADU. Bringing in $2,200 for the ADU and currently living in the main house until we find our next deal. Anticipating bringing in $3,400 for the main house which will give us a conservative NOI of ~$1,800 for the property.

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

Was looking for a single family fixer with potential for conversion into a multi-unit property. Found this gem in our ideal location with an existing detached bedroom ripe for the picking. Unfortunately it was a bit out of my fiance's and my price range for our first deal, so we scrambled to find a partner and went in on it with a friend. Don't want to speak too soon, but pretty sure this will be one of the best decisions of our lives and a springboard for more.

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

Zillow. We sent the seller a cute picture of us with our dog and told her how much we would cherish her amazing property (fully genuine). I think it was our dog that sold her on us.

How did you finance this deal?

20% down and jumbo loan.

How did you add value to the deal?

Put in just under $50k to renovate the detached space and convert it into a permitted ADU, spruce up the landscaping, completely separate the (now) two units on the property, and spice up the main house a bit. We did most of this ourselves, but probably spend ~$10k on contractor/handyman help.

What was the outcome?

Property just reappraised for $1.05M.

Lessons learned? Challenges?

If you are entering a partnership, make sure you have a VERY clear understanding for how much work each person wants to put in. If you have never worked together before, you NEED to agree on a way to compensate for time if someone wants to put in extra work. Ideas include a project dependent hourly rate, or a set portion of quoted costs from professionals (i.e. "the plumber quoted us $2000, but I'll do it for $900").

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

Yes!!! Nico Pollero (Agent, Sothebys), Tim Taylor (Lender, Homebridge), Joe Billings (Lawyer, Allen & Kimbell) and Vanguard Planning (drawings and permitting for ADU). All highly recommended.