All Forum Posts by: Christian Ballow

@James Kapenas, My friend @Kenneth Donaghy made a good point. The tax benefits from it being owner occupied the at least 2 of the last 5 years, gives you the most benefit. If that's not the case, I would recommend thinking about refinancing and buying the new property, or cross-collaterizing the existing property in order to access more capital and purchase a new property, a HELOC could potentially work here. This is another way to avoid the capital gains tax but in this scenario you keep your property tax rate on the previous property and would then own 5 units.

Don't get me wrong 1031 exchanges are great and I've done them for plenty of clients but there may be some options prior to having to sell the first property. Additionally, without selling the first property, you could potentially access some favorable owner occupied loans on the purchase of the 4-plex.

Best of luck with the transaction! Feel free to reach out with any questions.

Hi @Rabekah Siatunuu, great questions! I currently live in a house hack in San Diego. My first house hack was just a SFR that I rented all spare rooms to friends, I was able to decrease my housing costs but was still out of pocket just a bit. As of recently, my strategy has been to use ADUs as part of my house hack. I am now beginning to break ground on my 3rd and its worked very well the 2 times before this. What I do is look for a great SFR on a 6,000+ sqft lot then I move in with a roommate, in this case my gf. Immediately after closing I submit plans for the ADU, this could be a simple garage conversion up to multiple ADUs on one property. Once completed, I BRRR into an owner occupied loan and typically cover all of my mortgage costs and expenses. I hope to do this once a year. My first house hack was just a SFR that I rented all spare rooms to friends, I was able to decrease my housing costs but was still out of pocket just a bit.

The short answer to your questions above:

-Yes, I have had success but it is not as easy or straight forward as other markets'

-I've never found "the one," I've always just looked for one that checks enough boxes to make it work. Then I force it to work through my ADU strategy.

-I would say it is not realistic to expect cashflow but you should take into account the benefit of paying down your mortgage with the assistance of roommates. As opposed to paying someone's mortgage with your rent

Hope this helps, good luck! Feel free to reach out with any questions

@Bernardo Mazon, yes you would still need to go through permitting. Bonita would go through County of San Diego building department since it's an unincorporated community in San Diego.

Hi @Anthony To, I have about 11 ADUs currently in different phases of design permitting or development in various cities around San Diego. $36k is very expensive for the costs you were quoted, especially a garage conversion. I plan to build 2 homes and 2 ADUs through SB9 and I am expecting the soft costs to land around ~$36k. For a garage conversion, I would expect ~$5k in design, ~$3k  in title 24 & engineering, ~$9k in permitting fees, and school fees would depend on the school district. San Diego Unified School fees are $4.79 per square foot of assessable space, so it would be ~$3,353 in your case.

You can avoid school fees by keeping your development below 500 sqft.

@Jon Ful we leave that to our tenants. We make sure a new filter is in at move-in and make sure they know that it’s on them to purchase new filters. We use CAR forms and typically add it into an addendum then remind them via our FAQ. In this situation, since it hasn’t been explicitly stated, I would probably just provide the filter as a sign of good faith. 

@Jon Ful I used diycostseg.com last year for two of my cost seg studies. They were reasonably priced and quick. I'm sure they aren't advisable on larger projects but depending on the project size and complexity, they worked great for me. ~$650 for the study. I did a SFH & duplex

Are you planning to try your hand at wholesaling in San Diego? San Diego can be a very tough market to start a successful wholesale business. But as Don said it’s a business and it takes time to get your first deal under your belt

@Lindsay Bowman National City is notoriously bad with their building records on anything older than 15years. So I would start there, have title pull any and all permits. As for the second “unit” addition, it would be totally fine to rent as a roommate situation while you’re living there but the second it becomes a full investment property, you risk being red tagged.

Taking the steps to convert to a JADU would be the best option in this scenario but during escrow, I would look into that option. I am building 5 ADUs in National City now and they’ve all been anything but simple in terms of permitting.

Best of luck! 

Hi @Josh Yame, both @Matt Devincenzo & @Dan H. had some great feedback. I do believe that a manual rent survey of the area should be done in order be more precise in your rent estimates. 

In my experience a converted garage ADU will rent very close to the median rents for the area. The only discount factor would come from the size. Typical garage ADUs are about 480-500 square feet, which can easily be a small 1 bed 1 bath.

As for the attached home, there would be a slight discount for not having the garage but there’s such a high demand for rental homes in San Diego that I don’t believe you’ll feel the effects as much. 

@Josh Yame Are you looking to buy with a garage conversion in place or complete the conversion yourself?