All Forum Posts by: DG A.

As far as I understand you can only use an owner-move-in eviction on one unit in the building. So you can only OMI one tenant (read one unit in the building).  Also, if you ever need to do it again, then you'd have to move back in to the exact same unit. You could not move into other units in the building after you've moved out and later come back... say... 10 years later. Or 10 minutes later, for that matter.

You cannot sell the place before 3 years are up, or the tenants you evicted would have a reasonable chance of winning a law suit that they bring against you. If the circumstances of the sale were out of your control, you'd have a good chance of winning the suit, but you'd still be paying for a lawyer to go to court for you (so you'd lose money anyway). Tenants are usually familiar with the neihbors, and those neighbors will be watching you for 3 years. It's not that hard to get caught if you leave before 3 years. 

About family members... That's right... there is a such thing as an RMI (relative move in eviction). But, that relative has to be your parents or your kids. For some reason brothers/sisters and extended family do not count for an acceptable RMI. 

I talked to a lawyer bout this, and it is possible to take down 2 units. 1 via OMI and the other via RMI. But it's risky. You're trying to avoid getting sued, and tenants essentially have free legal help from organizations like Causa Justa, and Oakland Tenants Union. They have law school students and lawyers who just passed the bar at these organizations that are willing to represent tenants through a full case FOR FREE. 

The tenant's lawyers will strategically take a case through the longest possible course to resolution. Part of the strategy is to stop paying the landlord rent during the legal issues, get a relocation payment for the tenant, negotiate for more time for the tenant so they can find a place to move to, and increase the fees the landlord has to pay a lawyer to go through the legal process. 

Keep in mind this is FREE legal representation for the tenant. Landlords have no source of FREE legal help. So yes, it's possible to get 2 units. But would you really want to risk it?

Here's how you lose money:

• months of unpaid rent
• additional time for the tenant to find a place to move (and more unpaid rent)
• paying a lawyer to read documents and go to court (while the tenant does not pay)
• Relocation payments/buyouts/cash for keys

I don't think it's worth the risk.

It's easier to do things straight up. Buy the place, move in with the honest intent to live there. Raise the rent to market rate after 2 years. Live there a total of 3 years, and then do what you want (rinse & repeat). 

It's also possible to skip all the BS and use straight up cash for keys. Offering tenants 7K to 10K is what I hear it takes to get them to move in East Oakland. 

hey Dante yes,  you only have to move into and live in one of the units. 

About my cash flow. I'll put it like this. I was paying $2000/month for a 2 bedroom in east lake before I bought. My mortgage now is $2400. And I have a tenant paying me $825/ month. Round numbers I now pay $1600 a month to own a duplex. And the unit I live in now is 2 bed rooms.

I'm going to rent a room in my unit for $800 next month.  And in 12 more months I'll adjust rent to market rate ($1500/ month) for the other unit. 

So yes,  I'm losing money. But I'm losing less money than i did when I was renting. 

You should look at east oakland. At least Oakland in particular. My duplex will generate ~$1,100/month above the mortgage. I would cash flow at about $400/month above all expenses based on today's rents (PITI, vacancy, repairs, utilities, trash, property management, etc).

In oakland if the building is 3 units or smaller and you live there 2 years the building is no longer subject to rent control.

So you can find a property that's got below market rents that other investors won't want due to low ROI. You can buy it below list price on financing which is rare. And then you do an owner move in eviction. And after 2 years of living there you can adjust the rents to market rate.

That's what I'm doing.  Also my property has already appreciated by ~80k.

I predict that all the "bad" areas in the bay are going to appreciate because it's the last of the affordable housing left for people making a middle class salary in the bay area. People earning less are moving out to Antioch. 

@Barry B. the loan I'm talking about does require that you income qualify. That particular loan does not have a pre-payment penalty though. So, you could build and then sell without any trouble as far as I understand. 

US Bank does have business loan products for spec builds, but that requires a larger down payment and comes with a higher interest. I never looked into the business loan, I plan to use the owner-builder / owner-occupier loan instead. 

hey this seems cool,  I'd like to come. 

US Bank has the best low down payment options I've found. You can get in for 10% down on construction costs, and they'll even help you finance the land (30% down for land acquisition). Once you've built you can pull out money up to the 90% LTV mark.

I'm considering doing a spec build in Richmond CA or East Oakland CA. I'm specifically interested in doing "entry level" / starter homes, because (I think) the demand for those rarely drop. We have almost no starter-home inventory in the Bay. The tradeoff is you make less money per deal than on higher end spec builds. 

Scott,  this is amazing.  Thank you so much for continuing to share! 

@Rogers Smith,

There's a flipper / spec builder around here that built a house in West Oakland (transitioning neighborhood), He bought the lot for ~$150k, built a house on it for $450k, then sold it for $900k. 

The way to get rich in the bay area is to be a contractor!

Hell, if you can build to building code around here, it'd be worth it for me to pay for plane tickets for you and your whole crew to fly out here and put this thing together. Literally, it would probably cost me less. Everything is crazy expensive in the bay area, because it costs so much to live here...

Hey @Scott Choppin the posts are a good length. Heck I wouldn't mind them being even a little longer! Thanks so much for sharing your expertise!

@Josh Cuthbertson,

Essentially it's the homes listed here: http://www.caprecut.com/floorplans -- from what I understand, they cut the wood, and the drywall, and the flooring. And they send it to you on a truck. You store it on the job site, and pull the materials out of the container as you build. At least, this is what was explained to me. 

--

So I think it's the 2 x Wood, and not the SIPS paneling.