All Forum Posts by: Greg R.

Hey @Luke Devine, I agree with Russell, cost is definitely one - your principal balance will increase unless you bring a significant amount of cash to closing. Also, Let's say that you have a traditional 30-year mortgage that you've had for 6-7 years (or even more), if you refi into a 30-year loan, you're resetting the clock and now you're back to 30 years until you pay off your loan. There is also the hassle of getting an appraisal, or maybe even a termite clearance if it's a VA refi.

However, there are a ton of benefits with refinancing - really depends on your scenario. 

Quote from @Jason Wray:

Greg,

We are in a cycle as usual and it will not really break until 2024.  You are going to see higher rates due to the artificially inflated real estate market that stemmed from COVID.  People were scared and decided to pull money out of stocks and buy more real estate.  You had more people moving out of the North East and in general and selling their homes to then go and buy all cash and in most cases above ask setting new markets.  Any time the housing market starts to bloom the government gets greedy and wants a bigger piece of the pie.  So they hedge up on rates and LLPA/GSE fee's so that the banks have to charge higher rates.

This is all politics and unfortunately this new party is hammering Gas prices, Interest rates, food costs, etc...  Its not hard to go back and look at the previous (4) years and see rates were at an all time low.  We also had a well balanced market growing at a realistic rate.  I would not hold off on buying especially if you own any real estate now that holds enough equity to take out some cash for a Down payment.  Just stay frugal and buy smart not getting into something that needs a ton of work that will hurt your pocket.

 Hi Jason, may I ask why you think that this cycle will last until 2024? Is this based solely on the president and the assumption that someone else will take the helm?

Quote from @Jason Mileshko:

I would say that real estate is always in season. Sure there are crashes and economic issues but if you buy intelligently then you should be fine. This means don't purchase property based on what you think that it will appreciate for in the future but rather what cashflow you can generate. Understand important metrics like debt service coverage ratio, break even ratio, etc. This will help you understand if your investment can stand up to a worst case scenario. It also helps if you have more properties because if one starts to do badly you can use the rest to carry it forward. 

 Thanks Jason. If we look historically, we see times that were great to buy, and others that were bad. I agree that it's possible to make a good/ descent buy in an unfavorable market. However, buying in 2007 vs 2011 were very different markets. That's just one example. Was it possible to find a deal at the top of the bubble and make money? Sure.

Let me clarify, I'm not saying that we're reliving 2008, I know we're not. 

I see the consensus that anytime can be a good time to buy if you find the right deal, do research, etc. That's not what I'm asking. I want us to acknowledge that there are good markets to buy in, and bad markets. Why do you think that this market is either a good market to buy in or a bad market? What specifically about this market makes you think that?
 

Quote from @Nicholas L.:

@Greg R. I think "buy or wait" is a false dichotomy.  This assumes "buy" means you walk outside your house and close on something today, and that's now how buying real estate works - even if you decided to move forward it could take months.  Every deal should be evaluated on its own merits.

Yes, that's why my scenario said buying within 3 months. 

Sounds like a pretty good deal on the surface. Deals like this were common several years ago. In this market they're almost unheard of. Especially since you said this is in a desirable area. Most deals like this in today's market are in the parts of town where you need to wear a bulletproof vest. If this deal is as you described, and the building doesn't need anything major I would jump on it. 

Did you try to talk with the tenant? You said that you dropped off a letter and posted signs around the property. That doesn't seem to welcoming from a new landlord. In my opinion you can save yourself a lot of grief by forming good relationships (or at least amicable ones). When the diplomatic efforts fail, that's when you would want to start posting signs, notices, etc. If this is how you started off the relationship, I'm not too surprised that they filed a complaint.  

Ok, so I know that none of us have a crystal ball. However, I want to get opinions on purchasing in the next 3 months. This isn't tied to any specific scenario, let's talk in the general sense of purchasing real estate. We're seeing the rates go up, but in general inventory is still very low. Do you think there is going to be a crash? or maybe a collapse of the economy, or perhaps the dollar collapses and is replaced by some other currency? How about WW3, nuclear war? Hyperinflation? Or is it a great time to buy? Would love to hear your opinion. 

Hey @Dan H. thanks for the response. I see you're right up the road from me in Poway. Are you familiar with this kind of valuation happening in San Diego? If I was in West Virginia (no offense), I might expect this kind of value out of an ADU. But as you know, San Diego prices are sky high. I'm trying to figure out how my main house can get 100% of the value per sq ft, but the attached ADU only get 15% of the value.

That's the other thing, the appraiser didn't used a single comp with an ADU. All of his comps were single family homes without ADU. His comps were 0.4, 1, and 1.5 miles away from my house. I provided the VA with comps that had ADUs 2.6, 2.7, and 3.6 miles away. Obviously not as close, but the comps right next door are not an equal comparison as they don't have an ADU. I thought the point of comps were not only to find the closest properties, but also to find ones as similar as possible. Not sure why the appraiser didn't use comps that had ADUs. In this San Diego market if you have (2) houses over a million, one with an ADU and one without, the one with ADU is getting way more than 35k on top of the one without.

Most people who spend over a million bucks on a house love the idea of being able to offset their mortgage through a cash flowing ADU.

Hey @Peter Amador, I know this is an older post, but I am in this exact situation right now. Got an unthinkable appraisal for my home w/ attached ADU in SD. Check out my latest post to see the details. I'd be curious to know if you ever moved on this or you ended up doing?

Hey guys,

I know there's been a few posts on this topic over the years, but I wanted to share my experience to see if anyone has input or new info.

I am doing a cash out VA refinance. My home is in San Diego (single family residence) and I have an ADU. I got my appraisal back and it's AT LEAST 100-150k low. When I got into the weeds of the appraisal report, I was only given 35k value for my 494 sqft ADU which is about $70 per sqft.

My main house was given over $450 per sqft. To add a little context, this is not a garage conversion. The ADU is attached to my home and fully permitted. I also have an attached 2-car garage. Overall the quality of the ADU is equal if not higher quality to my main house. It's also a cash cow generating a very high revenue.

Seems outrageous to me that the appraiser would only give my ADU 15% the value of my main home (that it's attached to).

Again, this is a VA appraisal so I went the route to dispute/ rebut the appraisal with the VA. I got one message from their staff appraiser that said "the ADU’s value will be market derived; therefore, value per square foot of an ADU may differ from value per square foot of main dwelling area in a market area." Their decision is still in process and I should get a response sometime mid-next week.

From talking to my lender and realtor (both have been in the business for many decades specializing in my area), they've never heard of anything like this. They said that it can be somewhat common to get ADU value at 50-60% of the price per sqft of the main house, but never anything like 15%.

Like always, thanks for the time.

Greg