All Forum Posts by: James Tiu

Hello BP!

I will be refinancing a duplex in San Diego. The loan balance is at $420k. The appraisal value in 2018 was $650k. 

I would like to purchase another property in San Diego with my brother-in-law. With 43% DTI, we have calculated we would probably be close to $1million in financing using an FHA loan. We would like to buy a distressed property. Either a 4plex or a single family house and add an ADU. In the San Diego market it is tough to find a 4plex or a single family house and add an ADU for under $1million.

The big question is, should I refinance my duplex with a portfolio loan or a non-recourse loan where rates are higher, but it will free me from personal liability? This will in turn give me more financing and options in purchasing 4plexes, or single family houses with adding an ADU. Consequently, a refinance into a non-recourse loan will eat about $400/month of cash flow.

Thank you in advance for answering my question. I would really like to hear from investors who have multiple properties, have come across this situation with high DTI because of their market, have cash flowing properties, and have portfolio loans or non-recourse loans.

1. True, most ADU constructions start at $200k and more for site built. I have some capital to work with already. I would like to have as much capital on hand for any unforeseen costs or setbacks.

2. True again. I have asked around about appraisals on ADU's and modular builds. I realize it maybe a fight to achieve the valuation that is justifiable for adding a new unit on property. If I do not receive the appraisal, the extra $2k/month in rent does not hurt.

Thank you for your insight.

Hello BP! Special thanks to Chris Mason, I am using your template to create an accurate description of what I want.

Your goals and story: My goal is to cash out refinance my duplex. The issues that keep arising when I contact lenders is that the property is currently an investment property, which means 70% LTV vs. 80% LTV owner occupied. Both units are being rented. I plan to create an ADU and live in it with the capital from the cash out refinance. I would like to get 80% LTV on the refinance because I plan to owner occupy property post renovation. 2018 the duplex was appraised for $650k for my refinance from FHA to conventional loan. I imagine it could assess for $700k now. I have $420k balance on the loan. I would be able to cash out $35-$70k on 70% LTV and $650k appraisal.

Type of property: Multi-family: duplex

Location of property: San Diego, CA 92105

Purpose of financing: Refinance to cash out as much equity/capital to build ADU

Type of financing sought: Cash out refinance or Homestyle renovation loan

Current or prior ownership of real estate: I have another duplex with my Father. We finished a renovation and addition and he plans to carry the loan by himself.

Occupancy: Currently an investment property but would like to create an ADU to owner-occupy property.

Value of property at present and/or your offer price: $650k

After repair value: I imagine after building a 1200 square foot ADU the property would appraise close to $1million

Anticipated or actual appraisal issues: no, yes (what?)

Current rents per month: $1700/month and $1800/month

Fair market rents per month: Same as above

Down payment or equity: N/a

Source of down payment funds, if applicable: N/a

Income Source: Hourly W2

Gross monthly income (optional): $12-13k

Monthly debt obligations appearing on credit report, plus (if applicable) personal rent and alimony/child support/etc: $600-700/month

FICO: 700+

Credit issues: None

Additional details: I would like a cash out refinance of 80% LTV so I can owner occupy the property. This would give me capital of approximately $100k to work with on creating the ADU. I realize I can get a Homestyle renovation loan but I do not want to hire a contractor. I plan to build the ADU as an owner-builder. I can subcontract work that I cannot complete on my own, and that is where the capital would be useful.

Let me know if what I plan to do is feasible through the eyes of a lender. Thank you for taking the time to read and understand my situation. 

Hello Bigger Pockets community. My Father is looking for a mortgage company that allows for a 100% cash out refinance VA loan. If anyone has mortgage company recommendations, I would love to hear it.

A little background of this refinance. My Father and I closed on a property together May 2019. The duplex is in May. We just finished renovation and addition on the property. It is now ready for a refinance since the renovation and addition is complete. My father is ready to assume the entire loan through a VA refinance.

I am looking forward to what the Biggerpockets community has to say. Thank you for your reply in advance.

 The driveway is fully permitted by the city. It was a peculiar property because there's plenty of driveway for parking on the property but there wasn't an actual driveway/entry from the street. We had to create it and to my knowledge we had the driveway permitted by the city. It was only after the fact that the driveway was completed and inspected that the City noticed the tree and it's affected roots. They are now requesting my contractor get an arborist inspection. That being said, will I be the one required to be responsible for this issue? I have a much greater appreciation for trees now lol.

Hello BP. I have a question about tree damage caused by a contractor. I bought a fixer in May of last year in San diego. To start any construction and renovation my property needed a driveway from the street. We had to dip into the contingency fund to create a curb cut for the driveway. This is where damage to the city's tree was caused. The tree that my contractor believed was my tree was damaged because of the roots being cut for the creation of the driveway. My contractor has mentioned the city would like him to hire an arborist to assess the health of the tree. My contractor said to me he will wait for the end of construction and see if the tree is still healthy. My concern and question is will I be responsible for the tree if the city deems that the tree is unhealthy? I still have extra funds for my contingency but I believe that I should not have to dip further into it if the tree's health declined because of the contractor or subcontractors fault. BP please let me know your thoughts. I believe this is my contractor's fault and he may try to pin this on me. Thank you in advance for your tips.

Thank you for all the responses.

Kenneth, I used Cornerstone mortgage to finance this deal.

I believe I may have emphasized the wrong things and we are getting a little off topic. At this point, whether or not the ADU is possible I am moving forward with the addition. My main question is: Would I be able to add a permitted legal kitchen into my newly permitted addition? If I can could someone direct me to where I would apply for a kitchen addition permit.

Again, thank you to our BP community for your responses and insight.

Hello BP members,

I have purchased a 1400 sq foot 4bedroom 2bathroom duplex in San Diego. Each unit is approximately 700sq feet and 2bedrooms/1bathroom. It is going through a major renovation/rehabilitation and a permitted addition of 720sq feet and 2bedroom/1bathroom. I wanted to add an ADU initially but my initial lender said an ADU was not allowed in the FHA 203k loan. When the loan was sold and serviced by a different lender, they had no opposition to an ADU. I tried pivoting to have the addition set up to an ADU but the funding would be short. If I had gone with an ADU in the initial phase of the plan, I most likely would have an ADU now and I would not be asking this question.

That leads me to this question: Has anyone applied for a kitchen addition permit in San Diego? I would like to add a kitchen to the 720sq foot addition that is being adding to this duplex. The reason I am asking is because I would like to turn this addition into it's own in-law suite/space and a permitted kitchen would be the way to accomplish it.

If anyone has experience adding a kitchen addition permit in San Diego please let me know. Or if anyone in San Diego could direct me where to apply for such a permit, I would greatly appreciate the guidance. If this would not be permissible or permittable in San Diego also let me know.

As always, thank you BP.

Thank you Dan and Christina. I initially thought it would be better to add the half baths. My concern is that I'm going into my 6month reserves or using credit. I am like you Dan, conservative with my rent increase and project higher costs so I like to stay conservative financially and have reserves. I will be a tad more aggressive on this remodel and add the extra half baths. I appreciate the input and will take your information, recommendations, and advice to heart.