All Forum Posts by: Carlos Ptriawan

Thanks, Amit. In our Santa Clara County, we have a program to legalize the ADU as well.

When you bought the unpermitted ADU, did you face any problem with insurance or lender? There's one duplex in MLS currently with one unit is unpermitted ADU. Not sure I shall place a bid or not.

Realistically, almost everybody uses Replacement cost and not ACV. Many lenders also require RC to protect their investment esp if it's rental. When shopping the insurance I found the total cost actually is not too different between ACV and RV.

@Amit M. Legalizing unpermitted ADU is an entirely different thing.I thought before you've built ADU before but you didn't. But you're lucky when you able to acquire the unpermitted ADU. Obviously getting an unpermitted ADU is technically better than building a legal ADU these days.

@Hai G. unless we see the exact sqft appraisal from a sample property, it's hard to make a statement that ADU appraisal is done correctly. 

This was my problem before. Dave also teaches me so much about 1031. But I end up with cash-out refi for the following reason: If you sell your home, you will lose min. 8-10% as the sale cost anyway. A cash out will give you 75% of the house value. An entry Sacramento house is 350K (Duplex in Carmichael is 450k), so you will need $92K to purchase the house as an investment property. As long as you can pay that 25% of the down then try not to sell it. This way you will still receive appreciation juice from Milpitas house and the Sacramento house. The other trick is to have the duplex has a lease so the mortgage underwriting can use the income when calculating the DTI.

There're other strategies but this is the best risk/reward return, basically, just keep leveraging.

---> most RE investors will do better purchasing a property with an existing ADU than building their own <---

This is the most realistic answer. I've been digging all sold MLS listing that has ADU on it. The price is very competitive and actually giving an advantage to the buyer. There're only a few in the market.

I read very latest data. You may surprise reading this.

Nationwide home appreciation YOY: rising almost double digit.
Nationwide rent growth YOY: rising below four percent.

Now you know why a house in CA and even Flint Michigan is rising :) LOL

The apartment rent is flattening though.

This is the key from Lawrence : 

"If you are able to get conventional mortgages right now and aren't acquiring (properly vetted) properties or refinancing."

It's almost a no brainer. I feel like the gov. is throwing us money to invest. Never happen in history.

Very smart answer from @Dan H.. I'm also thinking the same. Since I shall think as an investor, I cancel all my ADU build project and swap them with a duplex. The number of unit costs in the duplex is almost relatively equal to ADU. Duplex is very competitive in every market.

The only way to make money out of ADU is only from the following I think:
- If the ADU is financed by gov. program and we rent it to gov. approved tenant.
- or if the ADU is paid by us and will be used for Airbnb, while we live in the same property --and never sell the property.

IFf you expect covid to cause a market crash, we shall already see the SFR market crash back in April. What happens is, there are only a few sectors that are affected by Covid and unemployment mainly in the hospitality sector. But for SFR sector, gov. is ALREADY bailing us out by printing the money, the yield of a bond is literally zero percent.

Can you imagine that the S&P company can issue a note with just 1% that itself causes unemployment crashing down?

Sure there's a market crash due to the covid for this asset class: hotel, hospitality,brick&mortar store, restaurant, few office spaces.
But the market is crashing up for this asset class: residential/SFR.

If you open Zillow home index and enter the worst market, eg: Flint Michigan, over there appreciation is already rising during covid times.

One thing I agree with you, yes the housing market will crash if there's no gov. bailout.

I don't know why CA would be considered a compelling place to invest at this point. <----
Taylor, people invest in CA because the rate of appreciation is faster 50% than nationwide appreciation. Especially in the most expensive area like Silicon Valley, the rate of appreciation is even faster than the rent growth. 

It's a unique situation where many times the rent can only pay the mortgage only. What's funny is it's still affordable at 33% affordability index; not the most expensive nationwide.

However, if people are buying the right investment, they can still buy a property with 8-9% cap, albeit much more difficult but the return is super awesome. You have cash flow and appreciation.

--There're lot of mispricing and skew in every market that's where the competitive advantage is--