All Forum Posts by: James Bianco

@David G. Good question. I was able to add a little gravel pathway in front of the main house for the tenants to park; 1 space only. My space is down the alley to the front of the ADU (Detached and separated by fencing).

No room for a JADU, though I think having just the two separate homes is the way to go. You have the income benefit, as well the desirability for future home buyers. I'm of the humble opinion that multis are more often bought be investors rather than families, and investors want deals. I feel like a JR ADU with shared walls would make the property feel more multi family-like and that may not be as appealing to future buyers. Could be wrong, but that's my opinion.

@Andrew Aladjadjian No, the main house wasn't rented when I bought it. It was a flip, and they opted to add about 400 sq ft to the former garage to make a pretty spacious ADU which was pretty unique and appealing.

I closed on the property literally days before the lockdown, so it took until July to find qualified tenants.  Had to cover carrying costs for May and June.

Yes, I thought the separation was definitely important, and a personal requirement of mine.  Even better if they had separate entrances, parking and addresses.  The previous two properties I made offers on had that, and they definitely sold for 15% or more above asking.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $835,000
Cash invested: $197,000

House Hack. Purchased a 3-2 single-family home with a permitted 2-1 ADU in Van Nuys, CA with conventional financing (20%) and added about $30k in repairs/upgrades/landscaping. I am currently living in the ADU and am renting out the main house. Mortgage is $3,099.00 and I am currently renting the main house for $3,200.00.

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

I work in music for film and television, and unfortunately still need to live in Los Angeles for the foreseeable future (though that my change). My goal has been to lower and stabilize my living expenses in LA, while owning an asset that will hopefully continue to appreciate.

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

Found it on the MLS. Didn't really negotiate it as I bought it slightly above listing (common for the LA market). It did appraise slightly higher at $840k though.

How did you finance this deal?

Conventional financing, 20% down.

How did you add value to the deal?

I repainted the interiors, landscaped the yard with drought resistant plants and a drip system, reconfigured the fencing to separate the two units for better privacy and yard space for both, and added a concrete deck for the ADU.

What was the outcome?

I am currently living in the ADU and renting the main house for $3,200/month which covers my mortgage. I'm now just paying about $1k for my taxes and insurance (including super expensive earthquake and umbrella liability policy) which are essentially my living expenses. I'm immediately saving about $700/mo and am working to save more so I can buy CASH FLOWING assets out of state.

Lessons learned? Challenges?

The LA market is stupidly expensive. It took me over a year to find this property that already had the permitted ADU in place. This property was pretty much turnkey, so I did pay a higher price. I made offers on two other similar properties previously, and they were bought for more than 15-20% higher than listing! However, I am not convinced that buying a much cheaper property and manually converting the garage or building an ADU from scratch would have saved me much $$$ ultimately.

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

I worked with Craig Van Skaik at Preferred Lending Group who is an absolutely rockstar of a loan broker, and helped me secure great 30-year fixed rate. My RE agent was Justin Smith of Berkshire Hathaway, and he was also a rockstar in helping me secure this deal.

Hey @Peter Mai, I was in escrow on a property in Reseda, but I had to cancel it unfortunately.  

It was a 4 bedroom main house with a pretty awesome detached 2 bedroom ADU in the back. The seller was also the flipper and obviously had a vested interest in the sale (already a red flag, but I went with it). After doing a general inspection and a plumbing inspection, I found that the main house needed a new roof, new water heater, and needed major plumbing repairs. The total cost of repairs was between 16k-20k. I requested that the seller credit me for the repairs and he asked to wait for the appraisal.

Then we got the appraisal and it came in super LOW!  About $35k below asking price.  I then countered to the appraised amount and the seller said that I needed to agree to go through his "preferred appraiser" if we wanted to get the deal done.  I'm pretty sure that's illegal anyway, and at that point I had had enough.

Pretty bummed about it, but I suspect I dodged a bullet.  I know better what to look for on the next one, and I'm sure I'll find it sooner than later.

Hi BP,

I have been on a mission to find a SFH in Los Angeles with a permitted ADU that I could live in, and rent out the house. Classic house hack. After finding a property that seemed perfect, my finance guy hit me with some unfortunate news:

Turns out, lenders won't count rental income against the mortgage if the owner lives in the guest house rather than than the main house of a zoned SFH. Without that, I can't qualify income-wise for homes 700k and up, even with great credit and the down payment.

Are there any lenders out there that would approve this type of deal? An owner occupied ADU, home rental?

Or do I need to revert back to the multi-family strategy?

Thanks,

James

I feel ya @Jeff Asher.  It's easy to get discouraged.  Good luck to you and the fam.

Great advice @Seth Borman and co., thanks! Yeah, I think the ADU approach is the way to go. Won't have to deal with the drama of rent control and current occupancy and I'll have the ability to knock out a high quality renovation beforehand.

Hey BP,

I live in Los Angeles and am looking to house-hack.  My goal is to live mortgage-free or as close to it as possible so that I can save money and buy properties out of state.  I'm torn between the following two options and would love any input on which one would be better from a long-term investment standpoint:

1) Buy a dup/tri/quadplex, hopefully with at least one unit delivered vacant to live-in and rent out.  Obviously RSO/rent control is difficult to avoid in L.A. and the numbers would have to make sense.

2) Find a 3bd 2bth with a detached garage (or ideally permitted guest house) that I can convert to an ADU and live in, while renting out the house. I've done the research and am aware of the rules and costs to make this work. Ideally, I would find a property with a guest house that already has the utilities connected, and just needs a kitchenette added.

My instinct is that option two might be a better investment over the long-term assuming that SFHs appreciate more than multi-family and sell easier?  Does that seem right, or no?  

Any thoughts or advice would be much appreciated, thanks.

Hey All,

I'm an out of state investor interested in buy and hold rentals in Nashville.  Looking for a rockstar investor-friendly property management company that manages properties specifically in or around the Madison and Old Hickory areas.  

Thanks!

James

Hey BiggerPockets,

I am a total newbie investor trying to find my first deal.  I humbly ask for your thoughts on my analysis of a property I'm looking at.  The interest rate was quoted to me, though I should probably shop around to see if I can beat it.  

Looking to do a long-term buy and hold strategy and possibly BRRRR (didn't do the BRRRR Calc) yet.

Any advice would be much appreciated.

Thanks!

James

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