All Forum Posts by: Hans Christopher Struzyna

I think these are all great ideas. The main thing you need to do is find comps in the area and model off of them. I just bought a property in Tacoma with a small 2/1 and a large 3/2 on it. This is the logic I'm using to approach mine:

 Use https://www.rentometer.com or www.Zillow.com and figure out what your rent cieling is and either tour them or use the photos to determine the level of finishes. 2/1s can only rent for so much and often have higher turnover as the floor plans become too small for people faster than 2/2s or 3/2s do. So remember you could experience more vacancy and/or wear and tear than a larger home so keep that in mind when looking at finishes. 

The two areas I would challenge you to really get clear on are the kitchen and driveway. I find that often times you can just paint (and sometimes have to sand) the cabinets, add new pulls and hinges and they completely transform. Look into that vs spending 9k on new ones. Unless they are totally falling apart in which case, replacement is a good idea. Unless the comps suggest you need a super sexy kitchen, I wouldn't spend money there. Same thing with the driveway. Look at the comps. For a rental of this size, don't expect people to pay for or want high-end amenities like a patio, paved driveway, brand new cabinets, etc. 

All that being said, if you are going to do this for you and enjoy it while you live there, that is another conversation. Just don't expect to see a huge ROI on it.

I hope this helps. 

Hi @DG A.  There are a ton of brick foundations in Oakland and the greater east bay. I find that inspectors will often tell you two things. 

1. It's not up to code and doesn't meet current seismic requirements (CYA)

2. Its been here for a long time through a number of seismic events and its still standing. 

There are a ton of ways to work on a brick foundation. The first thing you will want to check is the historic maps in Oakland. You said its a victorian and depending on what area it located in, you could be subject to some serious historic preservation requirements which could require up to 12 months of permitting before any engineering takes place. Check the address here: http://oakgis.maps.arcgis.com/...

The reason that is important is that if you are to replace the foundation, you will inevitably lift the house up to replace it. Generally, the city code allows for up to a 12-inch lift without triggering issues with the historic preservation part of the code (because modern foundation have, among other things, mudsills, which end up being taller than old brick foundations). Either way, you will likely have to do something with the front steps and a potential setback issue as a result. 

Overall, a complete foundation rebuild should cost ballpark $150-175/linear foot. That does depend on a number of factors, as you can see above. Bottom line is that this kind of property can be an amazing deal but it starts with its location and stems from there. Please feel free to DM me with any questions or for a few engineer/contractor recommendations. 

You totally have to do what you can to get your first deal. There are just some markets where its a seriously tall task even if you are willing to dig in and battle the red tape monster. That said, the market is shifting a bit so this line of financing will become more feasible over the next 18 months in even the most competitive markets. 

Hi Desmond, this is a great question. There are people who are specializing in ADU conversation and I would be happy to refer a few to you if you shoot me a DM. They will likely charge for their time to come out and walk through the property, however. Tradespeople are really in demand (especially in the ADU space) and you either have to call in favors or pay them.

As far as writing an offer subject to ADU approval, unfortunately, this won't work. Because you have not taken title to the property, you cannot pull permits or do any work since you don't yet own it. And in fact, if you go to the city and tell them there is an illegally converted space in a given property, you have effectively turned them in for a violation and have damaged the Seller's ability to sell the property and they could come to you looking for damages.

My suggestion is to hire an expert to walk the property with you and do as much research at the city level without disclosing the address or the existence of any work, and then move forward with an offer based on that. Much like in SF, we transact "as-is" so anything disclosed upfront is effectively taken off the table from a negotiation standpoint. 

I hope this helps. 

There are two challenges an FHA buyer will face in Oakland (or any other competitive bay area market). One is that they will be competing against 20% down financing that can close in 21-25 days. All things being even, Sellers prefer a higher down payment and a faster close when given the option.

The second and honestly more important issue is that in this market we transact completely "as-is". Sellers do inspections ahead of going on the market and expect buyers to read and do any further due diligence before writing an offer. Effectively what was disclosed is off the table for negotiation as the condition of the home should be backed into their offer price. Not all FHA loans are created equal and some lenders work magic with them but asking a Seller to clear a section 1 report or fix any other "health and safety" issues is very unlikely as there are just too many buyers willing to take on work after closing as long as it is baked into their price.

There are exceptions to this but I don't see too many of them coming up. This may change as we enter a shifting market though. We shall see. 

Investment Info:

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

Purchase price: $322,000
Cash invested: $64,400

Contributors:
Kristin Hedstrom

Two houses on one lot. We bought this place with one tenant in place and rents at roughly 60% of the market. WE are going to renovate this in two stages and get the gross rents at $3200+ for the whole property. Plus a Starbucks just moved in down the street so the neighborhood is really up and coming!

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

We were looking for a more traditional multi-family property but realized that we could get a premium on rents if we got two houses on one lot. This one was also poorly represented by the Seller's agent and we were able to negotiate a bunch of repairs in escrow. Plus instead of putting 25% down, we were able to put 20% down. According to ot the lender, its a single family with an ADU not a multi-family. So our cash in looks way better.

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

It was on the MLS and our agent, who also invests, helped us negotiate it.

How did you finance this deal?

Traditional 30 year fixed financing with a 20% down payment.

How did you add value to the deal?

WE will add a bathroom to the front house and renovate the finishes on both. Long term, we hope to tear down the back house or at least do an addition to it.

What was the outcome?

We are in the middle of this so stay tuned.

Lessons learned? Challenges?

We had a low appraisal and had multiple delays in escrow. The lesson learned is to always ask for what you want as the other side my just give it to you!

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

DM me for that!

I would work to build a relationship with a local title rep whos company will allow you to do assignments, double close and subject to. If you use them exclusively, they will often help you get data for free. Plus you have a better chance of customizing your data. 

Generally, I would say start by driving for dollars until you get some traction unless you have 500-1000 to spend every month. 

By the way, if you come across a good looking 4 plex in Tacoma, keep me in mind. Im a buyer!

Hi Alex, My name is Hans Struzyna and I am an agent with the Gunderman Group. WE are the top team in the Oakland area. https://thegundermangroup.com

I personally invest in rentals out of state and have done a few flips locally outside of my agent practice. I would be more than happy to discuss your needs and see if we might be a good fit to work together. Feel free to DM me if you would like to have a discussion. There are some amazing house hacking opportunities in Oakland. 

As an FYI, there are some serious landmines that you want to pay attention to when looking for a possible house hack. 

• Sewer Lateral Ordinance 
• Sidewalk Ordinance
• Rental Ordinance
• FIRPTA
• The reputation of the inspectors the Seller chose to do pre-inspection 
  Test Holes (if applicable) 
• Seismic reinforcement work
• Responsibility removing contingencies

No matter who you work with, make sure you get a clear explanation of each of these as they are very important here in Oakland. 

Best of luck and in your search and let me know if I can be of any help!

Best,

Hans

Hi Amaju, what kind of property is this? It looks like a four-plex. Or is it several houses on one lot? I ask because there are some new rent control rules that may affect your returns. What part of Oakland is it in? $2100-2300 may be low depending on the neighborhood and other amenities. 

Also, you only have a $200/month difference in the rents from the small unit to the large one. What is the size and bed/bath configuration difference here?

I also agree with Tim on the insurance piece. YOu have to get insurance. There are two great insurers here in Oakland that I would lean on for anything in the multi-family world. I'm happy to pass their names along if you send me a DM. 

I think your expenses are close but I would consider adjusting them a touch. I think your vacancy factor can be closer to 5% and your cap-ex should be 10% given the fact that you are in a rent control city (and state) and won't be allowed to raise rents on existing tenants to market rate. By the way, are the units vacant? If so, that is HUGE! If not, that is worth at least a 5-10% discount. I'm happy to talk about the nuance of that if you like. Lastly, I think you can get property management for closer to 7% but if you want to be really conservative, 9-10% will for sure cover you. 

I invest out of state personally but am very active in this market as an agent and would be happy to help you talk through this in any way that I can, even as a sounding board. Best of luck and I hope to hear from you!

Best,

Hans

Tacoma is a fantastic market. I live in Oakland, CA but am from the Seattle area and now invest in Tacoma. There are some fantastic people in this thread and if I can help you in your investing efforts, don't hesitate to reach out!