All Forum Posts by: Harman N.

@Sean Walton - good question about ceiling height. I'll have to check that. I imagine with drywall, etc that would bring it down an inch or two as well. No way to get to the street without going through the building. And would need to add another electric meter and panel. 

@Johnson H. - thanks for the advice on the anchor bolts and plumbing upgrades - I'll definitely keep that in mind! On the condo conversion, here's my understanding of what it would take:

1. Tenant buyout. Given that one unit is tenant-occupied, the master tenant would either have to wake up and decide to leave, or I would have to pursue a buyout. This is uncertain in 3 ways: (a) Don't know if the tenant would take it (b) Don't know how much they would want (c) Even if they take it, eligibility for conversion not be certain. As per Andy Sirkin: "If the buyout involves two or more tenants, none of whom satisfy the "protected" criteria described in the preceding sentence, then the normal owner-occupancy duration requirement under all conversion programs is extended to 10 years. The new law is not clear as to whether the 10 year occupancy requirement applies when two tenants vacate the same unit, or only when tenants vacate two different units; however, we expect the latter interpretation to apply." Let's say this is all successful. The entire process might cost $40K and take 3 months
2. Then I would have to sell/transfer ownership of 25%+ of the building. Let's say this takes no additional time, since I have everything lined up to execute as soon as #1 is done. This might cost let's say $15K in paperwork
3. Then there's a 1-year waiting period: "Two unit buildings with a clean eviction/tenant buyout history bypass the conversion lottery if both units are occupied for one year by separate (unmarried) individuals who each own at least a 25% interest in the property during the entire occupancy period." The current rent is ~$1850/mo, which is $22K foregone rental income
4. Simultaneously, I would take the opportunity to do some upgrades. That unit still has original knob and tube wiring, so that would definitely need to be upgraded! No crazy high-end remodel, so let's say $50K for this. 
5. Then, I would be able to pursue condo conversion. Pulling some numbers out of the air, 3 months and $30K in paperwork sounds maybe right. 
6. Finally, I could rent the unit for $1500/mo more than before ($1850 vs $3350 for a 2BR/1BA in Inner Sunset). So that's $20K per year

I've read on BP that convo conversion in SF adds 20-30% value. Taking 25% (feels a little high to me) would be $400K in value. So that's ~$160K and 18 months, to add $400K in value and an extra $20K/year in income. 

For the ADU route, I'll use @Amit M.'s number of $250/sq ft = $125K in this case. That brings $2000-$2500/mo in rent (depending on how much usable space is able to be carved out, 1BR vs studio, how garage-like it feels, etc). So $24-30K in extra income a year. And as per the original question on the thread, I'd say less than $400K in value, but not sure whether closer to $200K or $300K. 

And if I move out of my unit in 5-7 years, the rent at that time would still be market rate, whether it's a condo or not. So it seems like it's a question of owning 2 condos without rent control, or the 2 units with rent control + the ADU (also under rent control).

Sorry for all the text! Wanted to write things down to help organize my thoughts. I'm sure I'm getting some things wrong, so look forward to the guidance!

@Ben S. - The furnace and ductwork for the two existing units is already in the garage, and I would need to add a heating system for the garage unit. I'll look into the mini-split units. My sense so far is that for the existing units it wouldn't be worth it to convert to ductless - I should maybe try to re-position the furnaces in a corner to take up as little living space as possible. And for the new unit a ductless system might be feasible and make the most sense

Hi all,

I want to add a unit in the garage of my duplex. My question is, how can I reduce the space the utilities take up, in particular the HVAC? The water heaters I can eliminate via tankless systems, but not sure what if anything can be done about the HVAC units. 

@Johnson H. - I did think about condo conversion. I actually met @Amit M. in the fall, and he was very generous with his time in talking me through the different options. Given my goals to hold the building until retirement, live in it for a few years then eventually rent out all 3 units, and maximize cash flow, the ADU option seemed to make the most sense. I'm also keen to get more hands-on experience with value add plays.

@Sean Walton, @Matt Sanford - I'm adding the ADU in the garage. The garage floor plan is below. The front of the garage has 2 car side by side parking (for compact cars), and the back of the garage is inaccessible for a car. At the moment it's just about 700 square feet of dead space. Leaving some space for utilities, I would hope to get 500 square feet of living space.

So everything is within the building envelope. I live on the middle floor, right above the garage. There's a 300 square foot backyard (12' x 25'), which I plan give to the lower unit. The back of the house faces east. I would put big windows there so the unit has lots of light coming in, and doesn't feel like a garage space. 

Matt - when you say you've done a bunch of these, do you mean as a contractor, investor, or both? Any advice, or referrals? I'm looking for a good contractor and architect with similar experience!

@Gabe C. - interesting. How did you find this CPA? Through a referral? How have you communicated with him throughout the year - email, phone, or video? 

Wondering how much folks pay their CPA (both hourly and total), and where are you located? 

My CPA's rate went up this year from $395/hour to $595/hour. This is in San Francisco

Hey folks,

Roughly how much value does adding a legal ADU to a duplex and converting it to a triplex bring?

The duplex is in the Inner Sunset in San Francisco, and the 2 existing units are 2BR/1BA 1200-1300 square feet. The additional unit would be a ~450 square foot 1BR or studio. 

It seems like the average price per rent-controlled unit in SF is around $400K. That's the number I've seen in some reports, and also what I calculated by going through a couple of months of SFAA (San Francisco Apartment Association) magazines and writing down the sale price and # units of multi-family buildings. 

But of course that's just an overall average, and wouldn't necessarily be what applies in this situation. So was hoping someone had guidance

I'm going to be a data geek here -- have you guys seen any sort of 'gentrification index' to compare how much gentrification is going on in different neighborhoods across the country? One could always look at price appreciation, but a rising tide lifts all boats (ie, in SF all neighborhoods went up, not just Mission, Bayshore, etc) so that wouldn't be enough. Perhaps looking at the % of houses that are sold and then re-sold within the same year, at a higher price, to measure the level of flip activity? 

Hey @Samir Pathak - I remember you from last week's meetup! I've been looking a little bit at Sacramento as well. Don't know if I would buy in this environment, but would definitely be up for a drive up in about a month's time to get the lay of the land.