All Forum Posts by: Gil Vaisman

Thank you for the updates, It looks great! Curious regarding the final numbers

@Camhaoir Brecken,

What state are you in? 

Hi @Sean Yuan,

The short answer is: Not difficult at all, if you know what you're doing.  

I would definitely hire an architect to go over the project and I would advise strongly against cutting that corner and trying to figure it all out by yourself.  It's worth paying that money to understand what the implications are. 

In terms of cost, you can expect to pay $200-$250 per sqft to bring it up to code if you're not looking to make it bigger. In order to be called an ADU you need a bathroom and a kitchen. Does the rec room have plumbing and sewage? If not, that's an added cost

Feel free to message me if you want to go over the details and you can make an informed decision.

Contractor here... $150/sqft is optimistic to say the least. It's doable, but you need a full time crew working exclusively for you and the finishes are going to be low end, including prefab shower and pre-built kitchens. I am able to maintain costs that low on garage conversions. If you are able to make a secret sauce where those numbers are doable, you're going to break the market!

I've had a lot of clients build an ADU to live in them and I think its absolutely sensible to do so! It's not any different than someone living in a multifamily property with the owner occupying one of the units. I would look to fence off the access so there's added privacy for both yourself and the tenants.

1. I would do it. I don't know where you can get 3500+/month in LA county for a 300k investment. That's an amazing ROI. Personally I'm in escrow on a property in the same market (got the last of the 3% mortgages out there) and hoping I can be cash flow neutral. I would switch places in a heartbeat.

2. If you can manage the construction as an owner builder, go for it! PM me if you want to discuss the worker's comp and insurance. I have my opinions on the matter, that I'd be happy to express privately.

Hi Pedro,

I would recommend looking into a property that has a detached garage or extra space in the lot to add/convert an ADU, that's the safest way to cashflow. It's the best use for your money in any property. Personally I did this and would strongly recommend looking into it.

Investment Info:

Single-family residence fix & flip investment in Palm Springs.

Purchase price: $580,000
Cash invested: $146,000
Sale price: $910,000

GOT LUCKY!!! Bought a desert fixer with the intention of holding as a vacation rental. Then covid happened and prices went crazy, so ended up flipping it for a nice profit. Went over budget, but the market bailed us out.

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

Wife and I wanted a place to visit a few times a year that would also cashflow

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

Listing was poor, stayed on the MLS for too long as it kept lowering the price on a monthly basis. When listings go on for more than 60 days people tend to think there's something wrong with it. It was listed at 600k when we offered 570K were countered to 580K and accepted. Comps were going for 700k+

How did you finance this deal?

5 year ARM. Interest only

How did you add value to the deal?

Opened up the living room/kitchen area. New floors, paint, kitchen, bathrooms and cosmetics.

What was the outcome?

Midway through renovations we say that STR were under performing in the area. On the other hand prices were skyrocketing, so we decided to sell.

Down payment: 116K
Holding costs: 25K
Repairs: 121K

Total out of pocket: 262K

Lessons learned? Challenges?

Challenges: We ended up paying about 30k extra in renovations, because we were doing things remotely and could only drive there on the weekends. Paid too much for poor work that had to be done again. Changed contractor halfway through.

Main lesson was to be flexible and make lemonade out of lemons. When Covid hit holding became less profitable and selling became more attractive. We got really lucky!

Hi @Scott Choppin 

Thanks for posting. Currently I have my eyes on a very similar project in LA. 9,000 sqft lot, LAR1.5 zoning. Thinking of building 4-5 units. 4 will be easier to sell, as it doesn't require a commercial loan.

I would love to pick your brain regarding construction costs. The plan is to build two story fourplex, with 4 3/2 units. Nothing fancy, but good looking. I don't want to spill all the specifics here, not my intention to hijack your post.

Is it possible to reach out to you te get a better understanding of cost range?

Thanks!

Hello Biggerpockets!

I want to start flipping houses in the near future and I'm not sure on how I should finance my future deals. 

I own an investment property without a mortgage. I can easily apply for a conventional mortgage loan, get 80% of the assessed value of the property and start working with that capital. The other option is to obtain a HELOC through Wells Fargo (any other banks that offer HELOCs on rental properties?), get 60% of the assessed value and use it at my convenience.

My idea is to start growing the money that I have available through flips and eventually purchase more income property. The way I see it:

HELOC:

PROS:

• Don't use it, don't pay - great for flips

CONS:

• Variable APR that will go up in time
• Can be recalled/changed if Wells Fargo decides
• If I want to purchase a hold property I would have to look for another loan
• Smaller amount than loan
• Harder to obtain - not a lot of lenders

Loan: 

PROS: 

• Fixed rate that will be below market value in a few years
• Can easily purchase another property without a new loan.
• No loan recall or change of terms
• Principal loan reduction with time
• Lots of lenders

CONS: 

• Don't use it, still paying - higher holding costs

What can you recommend? Am I missing something? Appreciate the advice.