All Forum Posts by: Christina Labowicz

Hi all, 

Looking at some deals with ADU components for both me and my partner as well as my clients.

Last year it took about 4-6 months to get a permit on an ADU with the city for San Diego, I have another client who said its taking him over a year on his deals.

Has anyone gotten an ADU permit for a garage conversion recently in the city of San Diego? How long did it take, if so?

If it's a single family home owned in your name then they are exempt from rent control, but you have to give them a notice of that. If they have been there over a year and it is multifamily, then they fall under rent control even if they are month to month. 

scoutred.com is an easy way to get basic information on zoning. If you sign up for a free login then you can see what the dwelling unit/lot square footage is. Take 3808 Villa Terrace, San Diego 92104, for example. The zoning says RM-3-8, if you click on that you see that you can build one dwelling unit per 800sqft of lot area, with a 6250sqft lot means it can support 7.8 units. There are all sorts of nuances of if you put a percentage of affordable housing etc. in the development then you can build more density, etc., but this website is a good place to start. 

There is also a new ADU law that passed January 2020 that you can add one additional dwelling unit (ADU) per residential zoned parcel (and a junior ADU, if its your primary residence), or multiple ADUs to multifamily zoned parcels. You can find more about that here: https://www.sandiegocounty.gov...

San Diego is trying to up-zone neighborhoods to fit higher density to chip away at the supply/demand imbalance for housing, their effort results in "Complete Communities" which you can learn more via this website: https://www.sandiego.gov/compl...

Hi Cathy, Kimball Tirey & St. John has the largest presence here in San Diego. Give them a call and they will schedule you to speak with an attorney.

I used a company recently called The Home Store LLC https://thehomestor.com/

Excellent quality. Tell them I sent you and they will give a 20% discount, you'll be speaking with Patrick. 

From what I hear the quality is much better than H Cabinets. 

I went with grey shaker and a white quartz countertop, it looks really nice and the tenants don't make a mess of it. I have photos if you'd like to see. Adding the ikea vent made the kitchen look luxurious, it was only $375. 

@Aprilila Tran do you have enough cash to purchase a property in San Diego prior to the sale in NV? If they are investment properties and not a primary residence then you have two options for an exchange, a typical 1031 exchange that requires you to identify 3 potential up-legs within 45 days of closing escrow and close on one of those within 180 days of closing on the relinquished property. 

The second option is to do a reverse 1031 exchange, which means you have enough cash to purchase the up-leg first and then close on the relinquished property within 180 days of closing on the upleg. 

You do have to exchange into the same or greater value building with the same or greater amount of debt. 

I would be happy to show you around the market here in San Diego. We have a trailing 12 data set that shows all the transaction pricing for each zip code in San Diego over the past 12 months I'd be happy to send along. 

@Doug Spence Thanks! That's exactly right we will use the VA loan again. Although, we will be walking away with quite a bit of equity from this one so we plan to purchase two four-unit buildings; one with conventional financing and the other with the VA loan. We will do the same thing and buy value-add deals. Once there's enough equity in those we will repeat.

@Dan H. good question. We have a lot of clients who are still evicting tenants, although on the basis of substantial renovation. It was the strategy before and it's still the strategy, rent control only adds hurtles. 

However, because this data was collected over the past year and we just had the eviction moratorium lifted recently, my hunch is that the majority of the data attributing to this data set are the new asking rents once there is a vacancy. I know of some investors in town paying cash for keys to get to the vacancy, although it's hard to tell if that's happening on a large scale or not. 

Investment Info:

Small multi-family (2-4 units) fix & flip investment.

Purchase price: $645,000
Cash invested: $43,213

Purchased December 2020 for $645,000 with rents in place of $1,500 and $1,945.
Remodeled both units and now rents in place are $2,350 and second unit to be rented at $3,000+.

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

I am in multifamily and the 3BR rents have a large delta between 2BR rents, so this was my ideal first investment.

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

My broker, Terry Moore, had this listed for some time. It fell out of escrow 3 times before we got to it because of one of the units being in complete disrepair. I saw the potential in the property so knew it was priced right for what it was.

How did you finance this deal?

VA loan.

How did you add value to the deal?

Remodeled one unit in it's entirety including kitchen and two bathrooms and landscaping in the back yard. The second unit we replaced the kitchen, one bath was previously remodeled and the other remains in upgraded condition.

What was the outcome?

We will be listing the property in a few weeks and taking the capital to buy four units. Can you guess how much we will make? We will take the hit on the capital gains tax because it will still propel our investment career.

Lessons learned? Challenges?

This was an easy purchase because I had two "exit" strategies. One was hold for cash flow, since the numbers made sense upon entry. The second was sell for a profit, of which it seems the market is in our favor.

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

I represented myself on the transaction and used my favorite loan broker to get us the best loan pricing.

• The San Diego apartment market is amid a stretch of the strongest demand in at least 20 years.
• Overall vacancy rate of 2.4% compares to the stabilized rate of less than 2%.
• With recent demand, asking market rent growth is soaring, to its highest level in 20 years at 12.9%.
• More than half of San Diego submarkets recorded double-digit rent growth and asking market rents have grown by an average of 17% YOY ($2,600/month).
• The current pipeline of 7,300 units will be unlikely to apply much upward pressure on regional vacancy rate.

•Prices are expected to keep pushing upwards as supply and demand remain uneven, with demand far exceeding the supply.