All Forum Posts by: Cesar Perini

Thanks for the comment buddy. Fortunately we were able to rent out our JADU and received those rents. I kept my Maint cost low due it being a new construction with less concerns. I am managing it myself but might offload it to a PM company sometime in the future. These numbers are rough but pretty close to what we’re seeing at the moment. Thanks! 

Finding a profitable rental property in So Cal can be hard these days. With prices rising and people bidding 20-50k over asking, one could never cover their mortgage and expenses with a single rental property. Luckily in California we have the option to build an ADU (accessory dwelling unit). Since the state mandated the ADU laws in 2020 and made them way more flexible and feasible for investors, I've been on a mission to successfully complete a BBRRR by building an ADU. Buy, Build an ADU, Rent all units, Refi, Repeat. I bought an investment house last year from the MLS and I just finished my cash out refinance today. Here are my numbers…

Purchased: $600,000

Home type: SFH, 3b2b with detached garage and already rehabbed by a flipper

Built an ADU and JADU: $165,000 (740 sf ADU and 400sf JADU)

All in=$765,000

ARV=$908,000

CO refi @80% LTV= $720,000

$$ Left in the investment= $45,000

Rents:

Front unit=$2500

ADU=$2000

JADU=$1400

Total=$5900

Expenses:

mortgage =$3650 MIPI

Vacancy (5%)=$295

Maintenance (3%)=$177

Cap Ex (2%)=$118

Total expenses=$4190

Cash Flow=$1710/mo

NOI=$20,520

COC ROI= 45%

Approx numbers but you get the picture. Unfortunately I couldn’t pull out all my investment but having a 45% ROI that’s CAsh flowing $1710/mo is not too bad.

For those of you thinking about buying an investment property in so cal, building an ADU is the way to go!

@Dan Heuschele

Your right! I’m actually going to do this as Owner builder so it’ll definitely save on construction cost. Hopefully it’s enough to get some of the investment back when I refi.

@Matthew Forrest

Yeah hopefully with these new laws favoring investors to build ADUs there might be more homes with ADUs selling in the near future. When houses are sold with ADUs it holds good value but I’ve only seen 1 sold so far in my neighborhood. Hoping to see more sold in the future. Thanks for your input!

I live in So Cal and I'm looking to invest in rental property here. Prices are so high that rental income never exceeds the mortgage plus expenses. But, with the new ADU laws passed in 2020, ADUs are a good way to get great CF. The CF from an ADU can easily cover construction cost and cover the negative from the existing house. I'm just worried about the value add on the property when building an ADU.

My question is probably for appraisers out there. Does an ADU hold a good value? Since there aren't many comps yet it is hard to get an ARV. Can you use a duplex as a comp as long as it's the same SF and room count as the ADU?

I have an apartment in the city of Guarapari, Espírito Santo Brazil and I would like to list it on Airbnb. There are no hosts in that city so I was thinking of installing a WiFi keypad entry on the door to manager from the US. Then I can hire a cleaning company from the area. How feasible is this? Does anyone else do this?

@Chris Mason

This makes sense. It’s frustrating but I see how I won’t get the value I think I deserve on the project. In hindsight I wouldn’t probably spent just a little less on the rehab. At least my plan is to keep it as a rental. Thanks for the info! Much appreciated

@Suny Capezzuto

Thank you! I was able to find 1 comp with an ADU that was down the street but I couldn't find anything else. The appraiser used my comp but she then used 5 others with no ADU which brought the value down a lot. I didn't realize how important it is to do your own due diligence before an inspection. It will literally change the outcome of the refi if you do.

I have a 2b 1b house in bellflower CA. I extended it to a 3b 2b and built a 3b 2b ADU behind it. Now I own a 3b 2b house with an ADU that has 3b 2b. I'm refinancing the house now and my appraiser used comps of a SFH with only 3b 2b and NO ADU. That brought my appraisal value down a lot!! To me a home that doesn't have 6 beds and 4 baths isn't comparable to my house at all! Am I wrong for thinking this? Anyways, I disputed the original appraisal and the 2nd appraisal said they can't find comps with ADUs and can't use a comp that's a duplex so I have to keep the original appraisal. Any advise here or is this the way ADUs are appraised?

I need help finding a lender for a modular home investment in Mooresville NC. I tried a few lenders and they either don’t do modular homes or don’t do investors that are buying modular homes.