All Forum Posts by: Jason Hsiao

Learn the numbers. Read everything you can get your hands on. Talk to people--GC's, other developers, brokers. ULI's has been pretty helpful to me, although not exactly cheap sometimes.

Utilities and sewer connections most likely the developer will be responsible for that @Zach Stanard. Street it depends, if it's a private street like a part of a planned development then you can have that be part of the HOA's responsibility after the project is finished. The city is obviously not trying to add overhead to their budget but they need a public street to say connect through the lot push to have them build it out. Street light is also up for negotiation. Cities could make you pay for this as a condition of approval, depending if you have leverage or not you can tell them to go jump in a lake instead.

You can build and hold to collect the rent or build and sell. If it's tract homes most likely you sell. Other projects I kind of look at the returns. If I can get btwn 1-2% over the current cap rate I sell and keep the capital turning. More than 2% over the cap rate I keep.

If you're paying a builder or GC to build it for you, obviously you have to work in their bids into your pro forma. They in turn are charging you an overhead from the numbers their sub contractors quote them. You can cut them out and GC it yourself but you've basically just bought yourself a full time job in that scenario.

Is there a specific lot you're looking at? It might be more helpful or concrete to talk about specific examples.

Yeah, $450/sf is ridiculous. That's high even for Bay Area. A lot of people are just jacking up prices willy nilly bc they can get away with it. But you have the 30 ft pilings... special foundations definitely drive up the construction costs significantly.I'd keep shopping like @Jon Klaus said, @Anand S. and compare the line items a bit if the GC's break them out. From what you said the special structural and civil engineering is what's killing your build cost.

Lumber has gone up quite a bit bc a lot of them come in from Canada. All the west coast wild fire is not helping but I'm not sure how directly that affects build prices on the west coast, prob at least some.

You can hire a property manager or reach out to agencies that take care of short term (> 30 days to 3 or 6 months) rentals. You can also post on Craigslist or advertise yourself. Posting on Airbnb works too but restrict to only > 30 day rentals. There's always travel nurses or people moving in and out of LA or I imagine the studios have someone working on a movie or TV show that need short term housing.

It should only increase by the value of the ADU @Harman N. instead of reassess the entire property at the current value. You're not transferring titles or anything that would trigger a complete reassessment to step up your basis. This being a new topic and there's not a lot of comparable data replacement cost method should be used for the valuation. If the county assessor tries to do something egregious you will have to be a little persistent and forceful in getting your message across.

One of our most popular Meetup session was on this topic. I summarized the notes from that day here - https://wp.me/p8Uf93-99. Shoot me a note if you have any other questions or anything I can help with.

Hey @Matt D., I think it really depends on your time frame. I believe in the long term prospect of Oakland. I don't have a crystal ball, personal opinion in the short run and mid run you will see a price adjustments and over supply of inventory in Oakland once these new buildings are finished. SF's planning and building department are just too understaffed and have their heads up their rectums to get their acts together and more and more people are going to opt for Oakland. If your personal financial situation is ok and depending on the carrying cost it's worth considering holding it for the long run.

If there's any positive in the event of a downturn, is that build costs will be lower as well. Looking at your rough numbers, I think you're underestimating your build costs. I was estimating 850sf * 8 units * 300/sf = north of $2M. I also didn't see any soft costs like civil engineering, architecture, MEPs, etc.

Happy to sit down and talk more precise numbers instead of back of the napkin estimates or help in any way I can =)

Might not be the answer you're looking to hear @Nik Moushon, but really just comes with practice, familiarity with the code, and the build costs. If it's above a certain % of return or whatever criteria you use make the offer. There's only one thing I can guarantee your pro forma number and that is they will be wrong. It's suppose to be an estimate anyway so don't stress getting it right down to the penny. Also if it's a really hot parcel, send in an offer with higher price tag and proper contingencies to back out or renegotiate later. I use a sensitivity analysis as well in my pro forma so I can tell how aggressive I can get or how bad can things get before I consider it a bad deal or lose money.

Can't say I haven't lost out on deals just bc of speed... one time I couldn't get a hold of my partner for an hour to decide what entity to submit the offer or hold title in and when I call back the listing agent they had literally just taken another offer.

Looks great and congrats! I remember my first time still... Yes, the devil's in the details. Having a good architect and GC makes all the difference. Whenever a sub has a question we can just tell them to go look at the plans, but if your plans are missing info then ¯\_(ツ)_/¯

Hey @Chingju Hu, happy to chat. Shoot me a msg some dates that work for you. 

BTW, there are some good Meetups @Brenda Chen @Sean Walton and @Bobby Sharma organize in the City. Keep an eye out on BP or Meetup.com.

The assessed value of your ADU should be close to the cost of building it, or replacement cost. Your basis for land and improvement should stay the same. "Fair market value" is just a fancy way of saying what another person is willing to pay for it. With the high construction costs nowadays it's hard to add that much value, plus ADU's don't sell at the same $/sqft as the regular house, and there's not a steady readily available comparable properties to base valuation so the easiest method is replacement cost.

I hosted a Meetup and wrote about ADU's on my website. I have a few architect friends that have gone through the process in multiple cities. It is definitely a hot (and evolving) topic so thanks to @Wayne Brady for creating a thread. If you have other questions or need referrals shoot me note!