All Forum Posts by: Henry Murray

TL;DR: Currently about to close on a small duplex in Lawndale, California. My offer required that it be delivered vacant since the current owner is in the process of evicting a squatter. However, the squatter is playing the system a bit and is refusing to move. In the event that it looks vacant, I close, and the squatter breaks back in (while I’m at work or having it tented for termites, etc) and claims they live there, how do I ensure that I have the right documentation where I can call the police to take care of removing them? What kind of documents do I need to show that the property is legally vacant and that nobody can claim that they are a tenant there? 

Full story: So I’m currently in escrow for a small duplex in Lawndale, CA. I’ve been saving up for this for literally years and years and I’m very excited about this duplex since I plan to house hack it! I had another duplex under contract a few months ago but it turned out to be way more than I was looking to get into, this one is a much better fit. Part of my conditions of the accepted offer were that the house be delivered vacant. The closing date was supposed to be tomorrow (1/11) but it has been pushed back due to a “tenant” (basically a squatter now) who has been living there rent free for over a year and who is now refusing to leave.

The current owner let the “tenant” stay in the back house for a while for free because he felt bad for her. The owner is apparently a bit elderly and was busy selling a bunch of other properties for a while and saved this one for last to give her time to back on her feet.

The “tenant” at some point moved a mattress, dresser, and some personal things into the front house and started renting out the back house on Airbnb. This is illegal in Lawndale and the owner was getting fined for a while for the operation of an illegal Airbnb on his property. He convinced her to shut it down and paid for a storage unit to move the furniture out of the back unit to show the city that it wasn’t in operation anymore (and stop being fined).

When the owner asked her to move out now that he was ready to sell this property, she objected that he had “destroyed her livelihood” by shutting down her (illegal) Airbnb and refused to leave.

Sometime after this the owner started the eviction process (maybe 6 weeks ago now?). They apparently got an eviction judgement that was supposed to be executed last Thursday (1/6) but it has been delayed for a reason I’m not aware of.

The owner/sellers’ agent have swapped the locks out at least once but the “tenant” still found her way back inside (I’m not sure if it was the front or back unit). I was told that apparently, it’s technically not breaking and entering if you have a locksmith open the door for you since the locksmith takes it on good faith that you live there when you ask them to let you back in.

From what I have seen she has been generally compliant and has left the premise during the course of several inspections (with some cash incentive from the seller’s agent for her trouble).

She’s said that she wants to “deal with the new owners” but as the almost new owner hearing about all this I don’t want any part of this situation and want to make sure that the property is indeed actually and legally vacant before I sign my Buyers Final Walkthrough paper and close on the property.

So the question is, what documentation do I need to have in my possession that will allow me to call the police to arrest/remove her if she breaks back in a week or two after being evicted and after I close? What kind of documents do I need from the seller to show that the property is legally vacant and that nobody can claim that they are a tenant there?

Any relevant experience/thoughts/advice are appreciated here!

@Dan H., I didn't know the part about FF not financing duplexes with an ADU. I guess this would mean that my options for refinancing would (or could) be a bit more limited since there's a risk the lender couldn't sell the loan to FF?

Also, it looks like SB13 allows owners to delay compliance with some building codes that don't relate to health and safety, making it easier to legalize the existing ADU? Is that the part you were referring to? That might be pretty helpful for me (although I'd still obviously want and have to fix the major/safety compliance things).

@Eriverto Espinoza , I don't know about the garage building itself but the ADU was built inside the existing garage floor plan so *hopefully* if the garage (that shows up on tax records as the 2nd unit) was built properly all of the setbacks are correct and it wasn’t built on top of any city easements. Would the permits show me this? I’ve never looked at permits before so I’m not really sure what I’m looking for or should be requesting, so I just requested all permits related to this address. Who could I talk to to correctly/professionally interpret them if that's something I need help with?  

@Gabe T. I was actually a little worried about insurance since I don’t know the quality of the garage conversion. Is that something you’ve disclosed when applying for insurance and the insurance company wasn’t bothered by the unpermitted unit, or they might not have realized it was an unpermitted unit? I feel like that could be a bit of a liability for them to insure if the construction quality is unknown, which I was thinking would make it more difficult to find someone who was willing to take that on.  I also haven't gotten there quite yet to start calling insurance companies, it's been a busy week and a half already getting everything else lined up... 

I'm buying with an FHA owner occupied loan with as little down as possible (to save the rest for repairs) and after the inspection, my plan here would be basically to buy, move into the front house, hire a GC to run the remodel on it while I'm living there, then possibly rent out a bedroom while I fulfil my year requirement of living there, and then refinance out of the FHA as soon as I can.

I’m definitely not trying to purchase and keep operating an illegal unit but I can’t take care of this stuff all at once. Is there a grace period or something while you’re figuring this all out? Ideally if I could let that be as is until I’ve taken care of the main house, have a roommate there for some extra cashflow, and then address it in like 4-6 months, but I don’t want to open myself to liability and more problems there.

And at the urging of a friend in the Property Mgt business I’ll be calling a couple real estate lawyers for their opinions/take on the occupied illegal unit and my best course of action there.

I have a walk though scheduled with a program manager from a GC firm tomorrow to get an idea of pricing for each of the major things above and I’ve been told that they’ll be able to give me estimates for bringing things up to code.

I’ve requested permits from the city as of Monday evening when I figured out how to do it and I might have them as soon as today, so hopefully that helps answer some of the questions about what was and was not permitted in the main structure and the converted garage and confirm what parts have a certificate of occupancy.

I’ve also been emailing an Assistant Planner in the city and they’ve confirmed that ADUs are allowed on a R3 lot with separated single-family units (like this property). I’ve given him the address to confirm that’s the case with this exact property but it sounds pretty promising so far. Is that as good as I’m going to get for verification or are there other steps I can take?

Anything else I haven't thought of or should be looking into in the last few days of my inspection contingency?

Awesome! Thanks for all the great information and perspectives everyone!!

I had the inspection on Monday and learned A LOT about the property. It will be much more of a value-add place than I had originally thought. It looks like the past landlord has done literally zero maintenance for the past two years, and things probably weren’t great when they acquired it.

In summary, the main building:

• 1) will need to be tented for termites/ants,
• 2) will need basically two full bathroom renovations (floor around one toilet is a bit soft and rotted some of the joist down below, and the other bathroom is an addition that looks like it also might not have been built to code bc has really tight spacing and has a huge crack in the walk-in shower that basically just drains water out into the crawl space below the house and the floor under that area is just totally rotted out),
• 3) would need a refreshed kitchen (sink drain plumbing is in need of repair and at a minimum would need new countertops but likely new cabinets as well)
• 4) they recommended earthquake bracing to the foundation since it’s almost a 100-year-old house and reinforcing part of the cripple wall down below
• 5) found a clog (or at least an area the camera couldn’t get past) in the sewer line. Sewer pipes are a mix of cast iron and black plastic (ABS it looks like). Best guess at this point is that it’s fat from the kitchen sink since they don’t have a garbage disposal and that junction seems to be approximately where the camera got stuck. Although tenants didn’t mention anything about sewer problems in the main house so I’m not totally sure if it’s functionally clogged or the camera just got stuck at the ABS/cast iron interface.
• 6) water pipes are galvanized steel so I might need to replace some of them.  

And then there’s the back building. The upper unit looks basically fine as is (thankfully!) The lower unit is occupied, very very likely unpermitted, and “substandard” according to the inspector. A family has been living there for like 15 years they told me and it looks like someone converted the space but made sure not to have any street facing windows or to make it obvious that it was occupied.

• 1) the bedroom doesn’t have any windows so that’d need to be fixed
• 2) the bathroom (toilet and shower) are raised up like 1.5ft so that sewer lines didn’t have to run under the concrete. (Interesting but I’m not sure if it could be made up to code like that?)
• 3) Both units are on the same electric and gas meters and just split utilities evenly so they’d have to be split.

So it’s now ALSO going to be a question of if I have enough reserves to get all this work done, and if this is a project that I want to take on.

Hey BP!

I’ve googled this and asked around but I’ve found the forums here on BP are always a good source of advice with a lot of diverse perspectives.

TLDR: How do I determine if the potential unpermitted garage conversion on a duplex building I have under contact will definitely be able to be permitted in accordance with the city zoning rules? Who should I ask/bring in to get a conclusive answer about this? What else can I do to reduce my risk of not being able to get it permitted?  

So the long version is that I have a detached duplex (3BR/2BA and 1BR/1BA structures) under contract in Southern California right now that’s being offered as-is. The interesting part about this property is that I’ve been told that the garage has also been converted into a living space, which would mean that it has an extra 1BR/1BA unit. And apparently someone pays what looks like 60% of the rent for the other 1BR/BA unit for this area right now, so I assume it must be decently livable. I haven’t been able to get inside any of the units yet but my inspection is tomorrow. The seller’s agent is a part time agent and both he and the sellers seem to be very disorganized and old fashioned (they signed the offer by hand and faxed it back) and I don’t think they've done much to the property besides take off window awnings since they bought it a little over two years ago.

So I think there’s a large potential upside here because if I’m able to get the likely unpermitted garage conversation properly permitted and bring it up to code as needed, 1) it’d increase the total rent substantially and 2) it’d go from a duplex to a triplex which would be a great equity gain someday when I sell. (I’m also not sure why the current owner hasn’t done this but I’m trying to find that out. Either it wasn’t permittable on this property or they just didn’t want to invest the time/money in going through the process.) I’ve asked the city some vague and general questions about the process for getting unpermitted construction permitted after the fact and have an outline of the process from them so it seems like that part is possible.

However, the risk is that I don't want to find out just after after I've closed that getting the garage permitted as an ADU on this property would be out of code and therefore not allowed. It wouldn't totally kill the numbers but it would make it a lot more expensive to live there for a couple of years from a cash flow perspective. But the property would be a really sweet deal if I could make it into a triplex so that's obviously my goal. Plus California has a housing shortage as everyone know so a new unit in the city would be a good thing!

SO the question is, how do I mitigate the risk of not being able to get the garage area permitted as much as possible in the next week when my inspection contingency is open (and I have to make this decision)? Who do I talk to or bring in to conclusively determine if the property is eligible for an ADU under city zoning rules? And then also to make sure the 1BR/1BA unit isn't already counted as an ADU (since you can't have two ADUs for one single family unit).

I'm a bit wary of asking the city about this property directly because I'm not sure how they'd handle that and I don't want to make trouble for the current owner if indeed it is an unpermitted unit. I've also looked up and read the ADU zoning ordinances that I could find for the city and that was inconclusive. I'm going to try and pull permits tomorrow morning to see what I can find there too. Any other ideas BP? Anything else I should be watching out for here?

Just wanted to say thanks very much for the recommendation @Jon! I went to the FIBI meeting last week and I think I found exactly what I was looking for in the South Bay area! 

@Account Closed Thanks very much for sharing your property tax bills as an example! That's really interesting, and not how I expected it to work, so looks like I learned something valuable here. It does come out to about a 1% increase. Sounds like it works this way pretty consistently if you and your friends who are brokers have all observed this for years and years and in a variety of cities too.  Thanks for the explanation! 

Hi BP! So I'm looking at buying a duplex in the LA area as a house-hack and I'm wondering what everybody's thoughts are on earthquake insurance?

I have a friend with a couple of small rental properties in the LA area and he doesn't have earthquake insurance on any of them… says it's too expensive and he'd rather take his chances. I also recently talked to a real estate agent who says that her clients (buying $1M+ owner-occupied single-family houses rarely buy earthquake insurance bc they all figure that if something happens it will be so bad FEMA will have to come in and bail us all out anyway.

The way I approach insurance is that I think insurance should be bought for things that I can’t easily replace (ie I don’t buy the missed flight trip insurance from the airlinebut I think that car and homeowner insurance are a necessity bc I’m not in the financial position to just pay my way out if something happens to them or they create a liability). From that mindset it seems a bit irresponsible to not buy earthquake insurance on property in a place that’s known for earthquakes but I also haven't gotten a quote yet to see how expensive it really is. Maybe it is prohibitively expensive, or maybe just nobody has it so we’re all in this under-insured boat together and the federal government will be forced to step in? Or maybe the risk varies significantly depending on exact location so it's kind of a case by case thing, or there are other parts of the story that I’m missing?

If you own property in the LA area, what are your thoughts on earthquake insurance here? Necessity or will we all get bailed out by FEMA? Anyone have any data on what % of properties in the LA area actually have earthquake insurance? Any other parts of the story that I'm missing?

Thanks!

I think the property tax bill would increase by about 2%/year right?  The assessed value is capped at rising at only 2%/year 
due to prop 13 (unless there was a reassessment event) and the tax rate is constant (hopefully) so that'd be the same % increase.  Relatively small numbers compared to the total bill but if you're projecting out a few years the difference might add up to be significant.   

@Madison Santerre Ah thank you, found it now! For some reason I'd been having trouble getting the website that takes me to to work but I'd found the LA county Supplemental tax estimator via another method too.
I was really looking for the full tax bill that I'd be on the hook for after the property value is reassessed due to the sale.  If you're looking at property in LA just a heads up that the supplemental tax bill won't be ALL the property tax that you owe each year going forward.  From my reading recently it's just the difference between what the prior owner was paying and what you've got to pay based on the newly assessed value, for the remainder of that year only.  But it will have to come out of pocket all at once so definitely not something to ignore.