All Forum Posts by: Dan H.

 Petscreening.com supposedly verifies that the health provider does more than charge a fee for the ESA authorization.   I think this would be difficult for an individual to do.  The individual can verify that it is a licensed health care provider, but cannot easily determine if that health care provider is one of the many that advertise on the internet for ESA authorizations for a fee.

I personally think the biggest advantage of using petscreening.com as well as enforce AB468 is it discourages bogus ESA applicants from applying.  There are LL that are doing nothing to verify the authenticity of ESAs.   It is easier for the bogus ESA to apply there than to apply for my unit and potentially have their bogus ESA rejected and lose their application fees.   

I do not suspect that PetScreening.com catches a large percentage of the bogus ESAs, but just the potential of their ESA being flagged as bogus and losing their application fees to s far better than doing less.  Especially seeing the service is free for LL, there is no reason not to use them.  In addition, they track vaccination dates.   We do need not make use of this (I get the email but do nothing with them), but possibly would if we only had a few units. 

If it is a legit ESA, it still has to abide by the usual criteria (no barking, biting, and/or destruction, picked up after (we have daily requirement for private yards, immediately for shared/public areas)

Good luck.  

If you hired out all the work, you are more likely to get ~$0.50 for each dollar you spent on the ADU assuming 1) in single family zoned area 2) not converted from existing habitat space.

When you get your appraisal, post your appraised value and value of property without the ADU and ideally the address.

Good luck

How did you screen the ESA?  Did you use a service like PetScreening.com to help discourage bogus ESAs?  Did you make sure their health provider met the requirements of AB468?   Did you meet the animal?   

In the future, I recommend doing each of these.  There are a lot of tenants that purchase ESA authorizations.  Note AB468 has stiff penalties for the medical provider providing bogus ESA authorization, but to the best of my knowledge no one has yet to be fined for selling ESA authorizations.  The law would have more impact if they fined some of the places that clearly are selling ESA authorizations.  

Good luck

https://www.amazon.com/California-Landlords-Law-Book-Respons...

$26 for the kindle edition could be some of the best money spent on your RE business.  

Good luck

We had a duplex on the beach in gulf shores.   We sold it maybe a dozen years ago after it got hit in consecutive years by hurricanes.  Each hurricane red tagged about 50% of the houses on the beach and had to be rebuilt set back from the beach.  Both times our property got lucky and was not red tagged.  After the 2 hurricanes maybe only 25% were still on the beach, but the hurricanes were a pain and resulted in our insurance going up significantly. 

In addition, the property tax rate is reasonable but the valuation was going up faster than the ADR then the hurricanes hit and values fell.  So our cash flow was reducing during our hold due to poor ADR increase and large insurance and prop tax increases.   Meanwhile our local properties were having increased cash flow without the effort involved with 2 hurricanes. 

I do have seller’s remorse at times.  It was an awesome property that would be 8 digits in Southern CA if you could even find such a property.  

Good luck

 Assuming my calculation is somewhat close and it is negative >$400/month then at that price point I claim it is not worth holding on to.  

A $160k ARV is going to be real challenged to add $100 a month increase per year. $50/month increase per year is more likely. This implies likely over 8 years to have positive cash flow.

To me this property screams flip for someone getting started.  

Good luck

 I go to a meet up in San diego called private lending masters.   It is comprised of people who lend money, those that want money and those that want to learn more about RE.   It is perhaps my favorite meetup that is not associated with a larger group (such as SDRE, NSDRE, SDCRE).

For the most part the lenders only lend on non owner occupied ADU, at low percentage of ADU addition costs because they know that usually the value extract will be significantly less than the ADU addition costs. It is discussed at most of these meet ups I go to (usually in the networking that is before and after the organized meeting). So this is common thought and why it is a real challenge to get debt secured by the ADU value add at higher than 50% of the addition cost.

There are exceptions. My wife has an acquaintance in InvestHer that does flips in beach areas of Orange County that often adds ADUs. Most flippers will only add the ADU if there is already under utilized living space (not garage conversions but craft rooms, bunk house, etc) to convert. However, she seems to do great adding ADUs on select properties in super high value area. Note this does not imply that these are the typical home. Most ADU additions will get valued far under hands off cost of the addition if garage conversion or especially if ground up addition.

Good luck

I never do cash for keys. I do not desire to reward tenants for poor behavior.

I explain the consequences of an eviction to the tenant. I explain they will have difficulty renting a quality unit, that I will ding their credit, that I will attempt to garnish their future income to recover what they owe. They believe I will do what I state because I have always done what I told them I would do.

My market has a low vacancy rate. Poor tenants cannot obtain quality housing. My tenant requirements includes no evictions, ever. No excuses accepted

So far with a combination of good screening and good luck, I have never needed to evict a tenant.

When the time comes to evict our first tenant, I will hire the best lawyer and let the expert take care of it. I will add the cost of the eviction to what tenant owes, and if the cost is not recovered I will consider it a cost of doing business.

What I will not do is pay a bad tenant to leave so that another landlord gets stuck with having to deal with a bad tenant that I have rewarded for their poor behavior.

In addition if I paid a tenant to $crew me, it may cause me to lose sleep. Sleep is precious. I would rather not pay the tenant, pay a lawyer, lose some rent but not lose one wink of sleep allowing the bad tenant to get money from me.

Do not do cash for keys.

Good luck

ADUs additions in single family zoned areas add less value than the hands off cost of the ADU addition. You will likely get what you consider a poor valuation from any appraiser that a lender will use. Small units in single count are expensive development.

The negative equity position is one reason (there are many reasons) why adding an ADU is one of the worse RE investments.  

Good luck

I have crazy high DTI (like 80 to 1) but large reserves, crazy high credit scores, and fairly small revolving credit card balances ($20k to $30k but paid off each month).

I have yet to be turned down for a credit card. I highly suspect that DTI is not an automatic disqualifier. If it was, I could not get a credit card.

How are your reserves and credit score?   They may have played a role in your credit card denial.  

Good luck