All Forum Posts by: Bryce Matson

 Don't assume it's too late...you can submit a construction change to the building department and process the plan revisions to make the change. So ask your architect what the cost to do that would be. It may be worth the change if it opens up your buyer pool...

I have represented clients on buying and selling of ADUs and I have an ADU property myself. I have also helped clients buy and sell with solar. This is all within Los Angeles (including in the valley such as San Fernando, Reseda, Lake Balboa, and Toluca Lake).

Regarding solar panels:

As mentioned before, it is a great marketing point, but not necessarily a dollar value add. If there are still payments to be made, then it hurts the buyer pool because the lender will require the borrower to qualify with the payments. If you can make sure it is paid off prior to the close of escrow, it will be better. Appraisers also aren't giving much value to solar panels. Your Realtor will need to prove there is value by showing homes that are identical but sold for more with the difference being solar panels. Zillow did a study in 2019 saying in LA solar panels added 3.6% in value. I haven't seen the bump personally but I sell every single property in all of Los Angeles.

For the ADU:

Because you did a Junior ADU, you actually limited the pool of buyers. I would see about getting it permitted as an ADU with it's own address, etc. The reason being is the guidelines for JADUs require an owner to live somewhere on the property. That's great for house hackers, but when I bring it up to my buyers, their immediate response is, "but what happens after I move out?" House hackers think about the next step. Even non investor buyers think about the options. Every appraiser is different. Typically, they don't combine the square footage and bedroom count. They will keep the ADU separate. In the Valley, appraisers usually give about $50,000 in value in comparison to properties without ADUs. Only once I have seen an appraiser combine the square footage and bedroom/bathroom count on an appraisal (my personal HELOC) and I pushed back with the lender and got a different appraiser in. I showed the comps and my adjustments (I speak appraiser lingo), and got my property to appraise $35,000 higher. The other thing to factor in is how the ADU was designed. Is there privacy? Private outdoor space? I usually go through a mental checklist when I view ADU properties to see how it would work.

We are still seeing multiple offers, but instead of 10 it might be 2-5 offers. There is a buyer for every property.

If you have serious concerns about your Realtor, then I suggested speaking with ones more familiar with ADUs. I have had to educate other Realtors on ADUs/multifamily properties, etc, which allows my buying clients to get discounts on properties because they don't know how to properly negotiate or price it out. 

The appraisal will need to have comps of homes with other ADU's. If the loan is a Fannie Mae loan this is a requirement based on Fannie Mae guidelines. I have attached a link for your use and please look over the paragraph titled Zoning for ADU's. If the ADU is permitted, then I believe only one comp with a permitted ADU is required. All Fannie appraisals need at least 3 comps and in this case they should all be with ADU's.

https://selling-guide.fanniema...

I hope this helps and have a good one.

When I lived in Hawaii, I desperately wanted to buy a home with the long-term plan of renting it out and having a tax-deductible trip to the islands each year. I ended up realizing that it would be better to find a very solid rental elsewhere and use some of the cashflow to enjoy a nice vacation each year. 
All that to say, analyze the rental suitability in a vacuum. 

My wife and I also faced the sell/keep as a rental dilemma our property recently. We decided that keeping it as a rental, while retaining long-term access to equity was the best of both worlds. We ReFi'd into a very specialized 1st position LOC that's tied to a zero balance sweep checking account. Even at a higher interest rate, our monthly cost actually got cheaper because it's just an interes-only cost. All the while, we're paying principal first with every dollar we deposit. So we have that long-term access to equity, without signing ourselves up for 30 years of higher interest-first payments on day 1. It's been a great option for us, and a helpful tool for us to have in our financial tool belt. We've enjoyed the monthly cashflow and California appreciation, all while having that equity ready for the next opportunity,

@Bryce Matson you could consider a HELOC. Many banks will loan 80% LTV, some will do 85% depending on their current lending criteria. That might get you enough to do the ADU and some capital to play with.

A couple of things (as someone who has built an ADU personally and helped clients do the same in Los Angeles):

1) It is going to cost a minimum of $100,000-$125,000 to do the garage conversion. Your upfront costs are in the range of $20,000-$25,000 before you even start. You may have to build shear walls all around, and it needs it own sewer line that runs all the way to the front of the house. I'm not saying don't do it, I'm saying make sure you get proper bids.

2) You can consider a HELOC instead of a cash out refi. You have a great interest rate and it is probably not worth losing. Plus if you ever want to create better cash flow without buying more properties, you have the option to pay off the HELOC instead.

3) It depends on your financial position, but I always ask my clients who are not sure on whether to sell or not is what their intentions are with the money.

4) Since it is your primary residence, the first $500K of profits is tax free (assuming you are married and file jointly). Three years go by, and the money is taxed unless you do a 1031 exchange. Just something to think about.