All Forum Posts by: Jen Narragon

We own a quadplex in the heart of San Luis Obispo, CA. and for about a year and a half, we've been running our rental business.  One unit we rent on Airbnb, we live in one unit, and we rent the other two as longer-term rentals.  I've discovered a few things along the way and one of the biggest takeaways is that the next property we purchase will likely be something that we can Airbnb to avoid longer-term tenants. Our Airbnb is hands down the best part of our rental business.  We get solid guests who generally leave the place spotless.  The rate of return is at least double, triple, or quadruple times the rental income depending on the season.  It also allows us time to block off the apartment for friends or family to visit any time we want.  

We recently had a nightmare tenant and learned the importance of conducting a thorough background check before signing a lease.  Sounds like a no-brainer but I was just too trusting and never imagined a person of her nature could be such an inconsiderate person.  Pictured below is the condition of one of our longer-term rentals.   The tenant snuck a cat in and the cat destroyed the place.

Longer-term rentals are less favorable to me personally because they bring in way less money than Airbnb, the documentation is tedious, and getting a tenant who is a complete psychopath (raging tantrums, bulimic episodes, never bothered to clean, police calls, etc.) is never any fun.

If you're on the fence deciding whether to rent longer-term or Airbnb, I would highly recommend Airbnb all day long.  You can pretty much mostly automate it.  You also avoid a lot of the headaches with tenant/landlord laws, especially if you're in a place like California where tenant rights are favored over landlord rights.  Airbnb is so sophisticated and streamlined and you get paid well to give people an amazing experience.  I don't think I have any complaints about Airbnb, so far it's been a very rewarding part of our real estate business.  Each jurisdiction has its own rules for who can and cannot rent their space on the app so obviously check before you buy.  

 Thanks, neighbor! I'll be in Paso on the 17th for my female investor meetup if you know any cool gals who may want to join us, we're going to have a brilliant speaker:)

 Thanks for virtually stopping by Michael:) 

Quote from @Scott Mac:

You seem comfortable going into the walls and ceiling, have you thought about letting more air and light into the small kitchen?

Something like in the mockup might take an average space and make the unit something special.

SLO is such a pretty town, and your plex already has some pretty upscale pavers for the driveway.

Good Luck!

 Thank you, Scott!  This plex is pretty complex.  There would be no way to open the studio kitchen because there's an attic that lives above it.  The one-bedroom unit has a crawl space above it also so no opening up there either.  We've certainly become very comfortable getting down to the studs, this place was pretty ratchet.  I love the suggestion, it looks super bright and airy.

 Thank you, Scott.  I've been in RE since 2012 and have always staged my listings and done my own design on all of my personal projects.  I have a huge passion for design which is why I love taking on this massive project, I get to do a lot of shopping and seeing everything come together is incredibly rewarding;)

Thanks for seeing the depth of work, Janelle... #iykyk I can't wait to catch up and see your property!  When can I invite myself over;) 

Hi Nathan!

The purchase price was $1,089,000.00.  We've put an estimated $300k into it.  We've done a lot of the work ourselves which has been a huge savings.

It's been almost two years exactly since we bought our 1883 Quadplex in downtown San Luis Obispo and we've learned a ton.  Our next purchase will be very strategic knowing what I know now.   If you're a newer investor looking to purchase,  there are some definite things to consider.  In hindsight, we took on a massive level of risk.  Fortunately, it all worked out in the end but we definitely navigated through rough waters.  Zoning, permits, budget, supply chain, and screening tradesmen, were all areas we were newer to.  This was the fourth property my husband and I had purchased and the third property we renovated.  Although we had experience renovating, a quadplex was a completely different animal than your average single-family dwelling. 

I would say one of the single biggest decisions to make when purchasing a multi-unit is your strategy for the buildout as it relates to budget and cash flow.  I went completely intuitively and fortunately, it worked out well for us.  If you're considering a multi-unit, consider mapping out a detailed plan based on budget, zoning, supply costs, and the level of lipstick on a pig ability the project has so as to be able to pivot if need be.

Our project was a total gut job and the foundation was one of the biggest expenses coming in at nearly $140k alone.  We purchased during the pandemic and there were so many variables that shifted that could have tanked us.  There's no sure proofing a deal but there are things you can be aware of ahead of time that can save your a$$.  Trusted advisors are absolute and a solid risk mitigation plan will go hand in hand.

We did have our budget mapped out before we started the project but there were some unforeseen costs that came up such as the sewer lateral for example.  Now that we're nearing the end of our project finally getting to the unit we live in, our budget has shrunk and we've ended up doing a lot of the work ourselves.  We've been living like campers the whole time because our focus was on getting the property cash-flowing and rented.  

There's a lot of advice I have also on your planning schedule as it relates to how you're going to run your rentals.  Airbnb vs long and short-term rentals are all different animals and each jurisdiction has very different laws.  My initial focus when we moved in was on getting our Airbnb up and running.  Because I procrastinated on address change, I was able to qualify as a host in our city because of logistics.  There were so many unforeseen possibilities for disaster yet we managed to win the karmic lotto and skate through on top.  

As stressful as the past two years have been, I would do it again in a heartbeat and can't wait for the next.  I hands down prefer Airbnb over longer-term rentals for various reasons.  I'll post more on that another day.   All in all, being a female investor is one of the greatest jobs on the planet, I highly recommend it with some caution, awareness, and support.    

I have a message out to the seller confirming his asking price and I'll confirm once I do.  

This is a summary from the seller:

The property features an existing residence situated at the front of the lot, with a large backyard. Alley access currently used for RV parking could be used for Condo addition ground floor parking. An underground basement could also be engineered to maximize square footage.

The addition conceptual drawings feature panoramic views from 2nd, and 3rd floors with a small ocean view from a large roof deck. These conceptual drawings illustrate the highest and best use of this property. Randy Russum of RRM Design SLO, walked this property and created the basic footprint of these conceptual drawings that fit within SLO County Zoning, Oceano Beautification District guidelines, etc. Randy has developed extensively within the county, including the design and architecture for the recently completed CHC building directly across the street. I have experience as a licensed contractor and real estate appraiser, and completed due diligence on this project feasibility assessment, obtaining preliminary approval from the fire department and other county agencies of the floorplans, etc.

The 2-3 year ROI on the investment is projected at 20-50%. Rough estimated costs to build out these renderings "vanilla" total about 2 million, depending on features and final approvals. An "as built" appraisal of addition should value the property at about 3 million or higher.

This property is located within an Economic Opportunity Zone (EOZ). The main tax benefits available with EOZ engagement are:

1. Deferral until 2026 of eligible capital gains invested

&

2. Tax-free exit upon sale of the QOF (Qualified Opportunity Fund) asset after 10 years

This property is listed for sale, however, we are open to selling half equity or more, and are flexible on terms. All reasonable investor offers will be considered. Ideally, we are looking for an all cash offer with no contingencies and a fast close. A 2 month lease back after close or longer would be of high value to seller. A 2 year leaseback and construction supervisor position, plus equity in the new construction, would give the buyer extreme advantage over other offers.

Remodel projects are underway and to be completed before showing to residential buyers. We are allowing investors to schedule a preview of the property now, if they have intentions of an all cash offer, and proof of funds.

EOZ summary :

If the EOZ route of development is taken, the sequence of events for an EOZ project are as follows:

When the property is refinanced, it is placed into a new Joint Venture (JV) and registered as a QOF (Qualified Opportunity Fund) the JV will also register as a Qualified Opportunity Zone Business (a QOZB) which allows the investors to reduce or eliminate capital gains tax.

Below is a summary of the Opportunity Zone Investment procedure. Without enrolling in this, there is still a large profit to be made even after paying capital gains tax.

Investors with eligible capital gains invest those gains into a QOF.

The QOF contributes at least 90% of the eligible gain from investors into a lower-tier partnership, hereinafter referred to as the JV, in exchange for a partnership interest.

The JV uses the QOF's cash contributions, as well as cash from other investors or obtained through financing, to acquire and either construct or improve property in an opportunity zone.

At the investor level, each investor must invest eligible capital gain into a QOF within a prescribed time period. The general rule is that an investor has 180 days from the date of the sale that generated the capital gain, but partners in a partnership may have a bit longer when the partnership itself sells the appreciated asset and passes the gain up to its partners on IRS Schedule K-1.