All Forum Posts by: Dan Sundberg

You know I'm not sure if it's required for STR or not. However I'm almost certain MTR would require it, and definitely LTR.

I have a MTR in the Med Center area just outside of downtown and it's been great for 2 years now. 

You do still need to get it inspected through the Rental Housing Inspection Program, but that's pretty easy. They're just making sure the house is livable and you can find their checklist on the city website so you know what they're looking for. To my understanding too, you can rent your property out while you wait for the inspection and results, and if you miss some items on the inspection they're pretty easy to work with to get it remediated (In my inspection I was missing a smoke detector in the basement and they let me send photos when it was installed). There are fees, but the big one is upfront and then yearly it's like $18 to renew and they let you self-certify for 5 years. Not a big deal. 

As for marketing Furnished Finders is the gold standard for MTR.

Hey @Thomas Blocker congrats that sounds like an awesome project and like you've made great progress. I completed an owner build garage conversion in Sac in 2022 and would be happy to share my experiences. Shoot me a DM and we can connect. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $560,000
Cash invested: $55,000

The strategy going in was part live-in-flip, and part ADU value add. The property had a main house that was in livable condition, but mostly original from 1986. The previous owners had built a studio apartment that wasn't legal living space. We re-landscaped so it had a private entrance and yard, and finished the kitchen and had it permitted as an ADU.

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

We wanted a new primary residence, and wanted to find something we could have a rental on the same property to supplement our mortgage payment.

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

On the MLS. We beat out 5 other offers and paid over asking price. During inspections we were able to negotiate a $17,000 seller credit.

How did you finance this deal?

Conventional for the purchase. Private money for the renovation of ADU

How did you add value to the deal?

Converted existing studio to legal ADU. Added private entrance and yard to the unit is completely stand alone.

Main house performing mostly cosmetic renovations

What was the outcome?

ADU rents for $1,600/mo with an all-in cost of $25,000 to complete renovations.

Main house will rent for $3k/mo once upgrades are complete, and if we ever decide to move out. It's also turned out to be a really great primary residence. The property is also in a great up and coming neighborhood, and its appreciated about $40k in equity in the last year, not including the ADU value add.

Lessons learned? Challenges?

Picking the rental strategy for the ADU. The size of the unit was perfect for Airbnb or travel nurse mid-term rental. However the location was not. I spent a lot of time thinking about this and who the ideal tenant would be and ultimately decided long-term would be best.

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

Myself for a Realtor (I'm a Realtor professionally). JVM lending for our financing - they were great!

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $560,000
Cash invested: $55,000

The strategy going in was part live-in-flip, and part ADU value add. The property had a main house that was in livable condition, but mostly original from 1986. My wife and I moved in and have been updating the house doing much of the work ourselves.
The money making part though is the previous owners had built a detached studio that was mostly finished. We reconfigured the landscaping so the house had a private entrance and yard, and then added a kitchen and refreshed the interior, and had it permitted as a legal ADU. That property now rents for $1,600/mo and helps to supplement our mortgage. The cost to get the ADU rent ready and fully permitted was $25,000, most of which was the exterior landscaping.

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

We wanted a new primary residence, and wanted to find something we could have a rental on the same property to supplement our mortgage payment.

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

On the MLS. We beat out 5 other offers and paid over asking price. During inspections we were able to negotiate a $17,000 seller credit.

How did you finance this deal?

Conventional for the purchase. Private money for the renovation of ADU

How did you add value to the deal?

Converted existing studio to legal ADU. Added private entrance and yard to the unit is completely stand alone.

Main house performing mostly cosmetic renovations

What was the outcome?

ADU rents for $1,600/mo with an all-in cost of $25,000 to complete renovations.

Main house will rent for $3k/mo once upgrades are complete, and if we ever decide to move out. It's also turned out to be a really great primary residence. The property is also in a great up and coming neighborhood, and its appreciated about $40k in equity in the last year, not including the ADU value add.

Lessons learned? Challenges?

Picking the rental strategy for the ADU. The size of the unit was perfect for Airbnb or travel nurse mid-term rental. However the location was not. I spent a lot of time thinking about this and who the ideal tenant would be and ultimately decided long-term would be best.

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

Myself for a Realtor (I'm a Realtor professionally). JVM lending for our financing - they were great!

Thank you @Sean Ross and @David Malott - Hopefully I wont need to sell this any time soon and can just let the cash flow build up. But I'm sure that day will come eventually and hopefully there'll be a nice big tax bill to defer😁

Investment Info:

Single-family residence buy & hold investment in Sacramento.

Purchase price: $605,000
Cash invested: $140,000

The property was a single family home that we significantly rehabbed, including adding a bedroom. That was then rented out while construction started to convert a 275 sq ft detached garage to an Accessory Dwelling Unit (ADU). That was completed mid- 2022 and is now consistently rented out to traveling nurses at the 200 acre Med center located 1 block away.

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

The location was perfect in an up and coming part of town adjacent to the nicest part of town. It is also a 5 minute walk to a 200 acre medical campus.
The main house had some easy value add opportunities, as well as the ability to add a 4th bedroom. Long term, the house is also laid out to be split into a duplex.
There was a detached garage perfectly situated on the lot to convert into an Accessory Dwelling Unit (ADU).

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

MLS. I was able to negotiate a $5k seller credit. There were 6 offers total on this house so we had to be aggressive to win it, but because there was so much potential I was fine paying $30k over asking price.

How did you finance this deal?

Conventional financing, 5% down. We originally planned to owner occupy the main house, but due to changes in personal circumstances rented the main house out 5 months after the purchase.

How did you add value to the deal?

Main house - Added 4th bedroom, new plumbing/electrical, new flooring, cosmetic refresh.
Converted existing garage to ADU.

What was the outcome?

The main house has been consistently rented out for 3 years now.
The ADU is also consistently rented out to traveling nurses.
The main house generates $3325/mo and the ADU $1850/mo. After all expenses, including CapEx it generates around $950/mo in cash flow, not including debt paydown.

Lessons learned? Challenges?

The house is almost 100 years old and CapEx is much higher than expected
I skimped on drainage when converting the ADU, and the next year the unit flooded during severe rain in CA. A $7k investment up front would have saved me $20k a year later.
Location was key. The house and ADU are super easy to rent to high quality tenants.
Was decisive and moved with urgency. This wasn't "the perfect deal". But it got us in the game, and we locked a rate under 3% and it's been a solid deal.

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

Me! I self represented as I'm a professional Realtor.

Investment Info:

Townhouse buy & hold investment.

Purchase price: $450,000
Cash invested: $90,000

This was our first home purchase, bought as a primary residence in 2018. We lived in this home until May of 2023, when we bought a new primary residence and rented this one out. We did very little work to the property as it was newly built in 2016. It's currently rented for $2,800/mo to excellent tenants. After all expenses it cash flows about $450/mo.

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

We bought this property initially because the location was close to downtown where we wanted to live. It was only 2 years old and was very low maintenance, which was perfect for our lifestyle at the time. I also thought this area would be a good long term buy and hold, as there is a tremendous amount of investment in the nearby corridor to revitalize it, and it's adjacent to one of the best neighborhoods in the city.

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

MLS

How did you finance this deal?

Conventional 20% down.

How did you add value to the deal?

Very little done to add value to this one. Just kept it in good condition until it was time to rent it out, and made sure to refinance when rates bottomed out.

What was the outcome?

It's now produces about $450/mo in cash flow after all expenses, not including debt paydown. It's also extremely low maintenance, so I barely have to think about it.

Lessons learned? Challenges?

Would do again:
- New construction - low hassle and very little CapEx
- Buy a primary residence to fit lifestyle. There were options that would have made better investments, but the lifestyle this enabled fit perfectly.

Would reconsider in the future:
-20% down payment. Too much cash sitting idle
- Townhouse - appreciation has underperformed

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

Myself! I self represented on this one.

Congrats on getting into the game!  Sounds like you're on really solid footing to start. @Allan C. made a lot of good points...the ADU house hack opportunity in California is pretty huge.

my wife and I are in Sac, and have very similar situation to yours. We're almost done with our 2nd ADU project. It's definitely work, but there's positive cash flow and great appreciation. Plus having our rentals within a 30 minute drive is enormously beneficial.

Tons of great suggestions/advice in the previous comments. Roseville is a good area for MTR, as there are a lot of hospitals in that area for travel nurses. 

One more option that will reduce monthly expenses, and boost your rent a bit too is to buy a new home. All maintenance for the first year is covered under the builder warranty and everything is so new your CapEx will be super minimal for a long time. Plus renters are willing to pay a premium for brand new rentals too.

There are a ton of new home communities in Roseville in particular that are under $600k. Many of them are offering pretty good incentives too, I was just able to negotiate one down $30k this last week, so many of them are looking to cut deals now.