All Forum Posts by: Christina Labowicz

Hi @James Hedgecock and @Dan H. (who I already know is knowledgable), I'm happy to see you are taking advantage of the ADU play here in San Diego.

I am shopping for my first investment purchase. After thinking long term investment strategy I landed on the ADU plan, except the purchase and construction of ADUs. There are a plethora of SFR so not as limited to homes with current ADUs, but are limited to land size and purchase price that makes sense for cash flow after. I did come across a great lender who can do the funding on this. They fund initial purchase, construction loan, and then refinance afterwards. I am curious what your lending looks like after the fact, James. I typically work with 2-4+ investors/owners so really haven't come across many people capitalizing on the ADU laws, I would love to collaborate at some point!

My timeline for this strategy is about a year out. My partner and I have our eye on a triplex that we will house hack the next 6-12 months and cash flow once we move out (based on 41% expenses), its (2) SFR + (1) studio. We are purchasing that VA, and then once we move out and get tenants in will use FHA to purchase a SFR with a lot size big enough to support the ADU, get a construction loan, etc. According to my lender this is a doable plan. (Although I am still unclear how long we need to show tenant income before using it to qualify towards the FHA purchase, my lender has lead me to believe it will nonetheless nullify the VA debt as the income from the property will cover and then some), so can at least be back to square one with purchase price.

Like I said the investors I work with are years ahead of me so curious your thoughts on these details. 

@Lilly Tureaud and @Deanna O. maybe we can grab a coffee once this corona is under control! ^^Didn't tag

Hi! I love this thread.

I work as a multi-family agent in San Diego, I work at an office of all men and most of the investors I work with are men. I am the only female at my company meetings. The team I work with is great and I love the people I work with, I do feel that being female I bring a different perspective to the multi-family realm. I am able to bring a wholesome feel to many elderly clients that I think they needed and appreciate that was lacking in their prior experience.

My path has been helping investors buy and sell property, using capital to purchase property (stage I am in now), first establishing a few properties for long term buy and hold for passive income to cover immediate expenses. Once these are in place I will turn to flipping property for capital and rolling the gains into larger properties for buy and hold.

I love connecting with like-minded people so if anyone is in the San Diego area I'd be thrilled to connect!

@Lilly Tureaud and @Deanna Opgenort maybe we can grab a coffee once this corona is under control

I'm a multi-family agent in San Diego, here is what I am seeing:

Buyers are looking for a discount for uncertainty and waiting eagerly for price drops and good deals. I've had current escrows ask for price reductions and deals falling out of escrow due to the uncertainty ahead. They fear inability to pay as well as inability to vacate as well as inability to rent vacant units. 

Current projects on hold and waiting out the storm, costly holding periods may cause inexperienced investors to bail mid project. 

Higher leveraged owners will be pushed out if they can't cover their mortgage due to tenants inability to pay. 

Long term owners holding tight until everything goes back to normal.

SFR buyers are still looking and sellers are still hoping to sell.

There's a common underlying notion that there will be a downturn due to inability to pay. 

Great work and thanks for your service!

Hi @James Tiu, what suburb is the duplex?
Are you keeping it or flipping it? 

Can you put in one full bath to make a master bath and closet? 

If you can get $100 extra a month, you take the multiplier of that to see what the ARV of the increased income would be.

Any extra items you can put that drive income will also drive value. You can find this by taking the average multiplier of the comps or neighborhood and multiplying it by the added income. Adding laundry to a unit can also push rents $100-$200/month. 

For example, using the average GRM for 5+ units in San Diego County which is 14.55GRM:

$100 income x 12 months = $1200 annually

$1200 x 14.55 (Average GRM) = $17,460 in increased value

From the looks of these numbers its a good investment. Would have to dig deeper for your neighborhood and comps to find a more accurate value.

Feel free to PM me if you have more questions!

Hi @Matthew Forrest and @Jessica Lawrence

CJ Donovan and Caroline Gilligan with First Foundation are 5+ lenders (same company, work independently). If you convert a 4plex into a 5 or 6 unit they can refinance with the additional value or finance a purchase with the ADUs in place. 

Rick Dennis with Evergreen Home Loans is my go-to for SFR and 2-4 units. He is familiar with lending with 75% of the ADUs income (must be permitted) to help qualify for the loan.

Let them know I sent you if you call! Feel free to pick their brains.

Best, 

@Coleman Cox the amount you have to put as the downpayment depends on the strategy you would use. You can put as little as 3.5% down on owner occupied SFR or 2-4 unit, buying SFR to own and rent to friends is better than paying rent, but its very difficult to find a cash flowing 2-4 unit property at that rate and you'll definitely be sacrificing on the neighborhood you live in. If you have 25-35% down then you can find something in a C class area that you don't need to owner occupy and can rent in the neighborhood of your choice while you have a mortgage paying itself off and putting change in your pocket for your next deal.

I tell new investors these are their main options:

1. Owner occupy turnkey SFR, better than renting

2. Value-add SFR, lending can cover the cost of the repairs and gain some equity

3. 2-4 unit owner occupy - sacrifice where you live but can throw all your savings into a deal and eventually it will cash flow for you when you step out of it

4. 2-4 Unit 25%+ down - most ideal, yes we can definitely find cash flowing deals with 25% down

@Matthew Forrest this is a new law for us here in CA so there is still some ambiguity in the process.The lenders we use are saying that they will lend based on the new income (as long as the ADUs are permitted) and essentially count the ADUs as normal units. 

Hi Mark, a great play we are seeing is investors adding ADUs to 2-4+ units. Specifically with a 2 car garage, carport or storage space that can be converted into another 1-2BR unit. This, for example, turns the duplex into a triplex and increases the income. You buy the duplex at duplex cost, put $100K into ADU conversion, and now that extra unit will sell for retail price, depending on the area that additional unit will be worth $150-$200K.

Our client who has a 4plex up in Carlsbad, for example, can convert carport and storage space by spending $150K (the existing square footage is already there) and now his 4 unit will be a 6 unit and will jump up in price from $1.2Mil to $1.8Mil. 

The ADU play is great in the 2-4+ setting because buyers area already in it for the investment rather than their dream home. Not all home owners will put value in owning a unit in the back of their house or worse, sacrifice their garage for one.

Here is a specialist that I reach out to sometimes with questions: ADU Pros (google them because I can't put contact information)

Hope that helps!