All Forum Posts by: Dan Sundberg

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $605,000
Cash invested: $120,000

Rehabbed the main house, and converted a detached garage to an ADU to rent out separately.

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

This allowed us to create a cash flowing property in a high appreciation market. Also, Sacramento is in an intense housing shortage, so anything to add additional housing to the area is of interest to me.

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

MLS

How did you finance this deal?

Personal savings

How did you add value to the deal?

Added a bedroom in the main house, new flooring, and cosmetic refreshes in the main house. New plumbing and electrical. Converted 275 sq ft garage into studio apartment.

Hi Susie - congrats on the potential high appraisal! That speaks really well for how well executed the project was. I think your answer is going to depend on your goals. If you want to really dive in and do more deals, then pull out the money so long as you can afford the extra monthly. If that cash flow is super important to you and this was a sort of one off passive deal, then probably leave the money in. 

My thinking on this is if you can pull out an extra $32,000 from that house that's basically another down payment for the price range of home you're in. The value of the first deal is to get you to your second deal, not to get rich. So if you can use your first deal to get you to your 2nd and 3rd...big win...

Otherwise that $32k would just be sitting in the house earning you $150/mo or 5% annual returns...based on this first project, I'd bet you could earn more than 5% with that money by BRRRRing another house... 

Like many of the other folks who have posted here, I think the answer depends on your experience level. Sounds like a high risk high reward type project. Pulling off a multi-family development in LA near campus could be super profitable, but will probably take a few years and an intense amount of money. 

If you are a relatively new investor, and assuming you are 1 of the 8 inheritors, it would be better in my opinion to sell the house, and take your $80k - $100k as a seed fund to invest in single family and small multi-family deals. This way you could get your money working much faster and start doing projects that will let you build experience to take on progressively larger projects. 

Sounds like a solid plan. Good luck!

Hi @Gabe T. and @Eduardo Aguilar - also following this as well. Investor and Realtor here in Sac and very much on the look out for investor friendly contractor for current and upcoming projects. Can you DM me the info for your contacts too? 

Thanks!

If that's the case then there are no restrictions. Can you just have them pay you rent and let them live in the house until they get the other one fixed up? 

Hi Yosary - welcome to BP and congrats on getting started! Sounds like you have your market picked out, which is helpful. Your two best next steps would likely be to consume as much education on the topic as you can get your hands on, and start networking. Listen to podcasts, watch YouTube, read posts, and maybe buy a book or two. Second, see if there is a local Real Estate Investors group, either through BP or meetup (or both!) and go and start talking to people to try and learn as much as you can. A great way to break into investing too is to find someone experienced who will let you watch over their shoulder. If you can contribute value to them, you may be able to find someone to mentor you in that way. 

Regarding the cheap houses website...when you find it let me know. I don't think any legit ones have existed in a long time, unless you have a lot of cash...mostly the way you find houses now is relationships and hard work. 

@Trevor Carlson - Yeah, if you are using traditional financing (FHA, Conventional, VA) and are applying for the loan as a primary residence (not an investment property) one of the stipulations of most all lenders is that you take occupancy within 60 days. As for how they verify that......? But if you don't take occupancy and they find out it can technically be considered mortgage fraud and unfortunate things can happen with your loan. Do you have a lender or a realtor helping you out with these yet? They can definitely be an excellent resource for these sorts of questions too.

Hi Trevor - So it sounds like the issue is that they need to start taking action to fix up the primary? If you are going to purchase the house as a primary residence you can easily allow them to rent-back for up to 60 days and if it's going to be a rental then they can just be your first tenants. During this time are you able to help facilitate any of the work on their primary? Perhaps you could negotiate a lower price on the house in exchange for you helping to fix up their primary first. Not something I'd do with a random seller, but if it's family maybe it would work...

Oh wow - could you also convert the detached into another living space? Turn the whole thing into 3 units? That would make for some awesome cash flow...