All Forum Posts by: Juan Escarcega

Anyone know a good GC that would consider partnering on a project? Even a solid referral to someone who can walk my property and give me an honest quote would be great.

PROJECT: I’m considering converting and upgrading my duplex BACK to a triplex in the South LA area near USC. It’s a fairly straightforward conversion in a quickly gentrifying area, but I’m already overstretched and on a budget. I’m pretty handy and can do a lot of cosmetic work myself, but my biggest headache has been in navigating the city so I want to make sure I don’t get caught up in anymore red tape... gotta love LADBS.

Thanks again everyone! I found a really great hourly and understanding architect that is working with me as I go. (hit me up for his info!!!) I should be getting building plans delivered today or tomorrow for a SFR C-of-O to the city this week, so wish me luck! I never hold my breath when it comes to the city, but it is supposed to be a simpler, over the counter type of plan check. Either way, I have given myself a RENT OR SELL deadline until the end of the month. Will keep you posted!

Seth:

I think the Ellis Act still requires a hefty payout, but the timing worked out so that I have been able to keep the property vacant and I'm occupying the other unit anyway.

Steve:

I spoke with some local realtors and would actually be in the ballpark of a break even point. My comps were pretty close and could even walk away with a few bucks (very few) in my pocket depending on the final sale price.

As for capital gains, I've been in the property for almost exactly a year and would need to qualify for an exemption, which if I did, I think I would be ok  based on the amount of time I've been here.

Mel: 

Thanks for the podcast recommendation. I feel like I've listened to it before but will definitely check it out again! Obviously I'm still new at this, but as a bootstrap investor, I picked this because it offered the most bang for my buck in a central location with the most affordable financing available. 

Wow, thank you everyone for the input!

I spoke with a lawyer and he pretty much confirmed Michael's opinion on pursuing it in court; pursuing anything under 100K is a loss, so I'll likely sell unless another opportunity presents itself... 

Feel free to send me your best realtor recommendations!

Here are some answers to the questions below.

Eric:

I'm looking into getting an estimate this week, but I speculate at least 50K-100K based on other comps in the area (although I'm not sure how much in dollars any of these issues would factor into the pricing from a market stand point of view, other than to negotiate in the worth of cost and risk to the buyer).

Ali:

Getting estimates from GC's and architects has been a little bit of a challenge with quotes all over the place, as I find them a bit reluctant to work out multiple plans and prefer to focus on one at a time. Will definitely check out the @Jeff Greenberg meetup next month, thanks!

----Maybe I should just keep calling around/find better contractors?

Dennis:

For the scope of construction deemed necessary by the city, it's hard to be certain without shelling out another 10K-15K for architectural plans and holding costs. All of the building plans and documents I've gathered are tiny plot plan sketches at best with some poorly written cursive squiggled next to it for the description. My best guess is that someone converted a kitchen to a bedroom and cut a doorway into the diving wall between the to two units. The issue seems to be less of a structural issue and more so due to a lack of paperwork ever existing on the house, period. Everything comes up as inconclusive when I bring it to the city for them to examine.

Matt:

My inspection didn't mention anything about illegal construction, just said "as-is," which I guess technically there is legally no such thing in CA, according to the attorney I spoke with.

Joseph:

Checked out the link, seems pretty interesting but there are a couple of hang ups I see myself getting into as there have never been any legally recorded tenants on the property in addition to being forced to provide section 8 housing, which is a less attractive option. No go on AirBnB, highly frowned upon by the city with crazy rules and fines. RSO technically means I'd have to pay every guest a relocation fee (up to 20K/family).

Ah, I see. The other thing is that since I’ve had the property less than 2 years I might come out just as underwater if I were to try and sell it after capital gains. Would a 1031 exchange be something feasible in this scenario? There also seems to be a number of people with a hand at fault in this one and every lawyer I’ve spoken to seems to think I have a good case. The title company has also filed a claim for me and i am waiting on their call. Does any of that make a difference in your opinion? Also, if I do sell, do you think would it be worth the investment to buy the architectural plans or sell as is?

Hey BP!

I am currently FHA house hacking a property that I purchased about a year ago just south of USC which, unbeknownst to me, had illegal construction, which caused a host of problems, in addition to other issues. None of this was disclosed to me at the time of purchase and there is reason for me to believe there may have been some funny business. After speaking with friends, family and mentors, I was strongly suggested to seek legal counsel in regards to recovering damages, but am trying to avoid a costly and drawn out litigation which may prove more trouble than it's worth.

I'm currently in talks about having my case reviewed and have gotten several quotes from architects for building plans, but the timeline is too uncertain and I am accruing steep holding costs in addition to any fees/plans/services I have to pay, etc. My biggest hurdle has been in obtaining a certificate of occupancy, which is a lengthier and more expensive process than I (and my wallet) had hoped. To further complicate things, I am in an RSO zone and have been holding off on getting tenants in the meantime to avoid paying relocation fees.

The silver lining is that the supposed DUPLEX that I bought is legally recorded as a TRIPLEX in a rapidly gentrifying area and has already gained equity, but that type of project falls outside my scope of rehab capabilities and my finances are stretched pretty tight as it is. I've called around and from my understanding, borrowing is essentially out of the question, so I'm on a deadline to get things on track or risk foreclosure...

Ideally, I'd like to keep the property and salvage my credit but am exploring other options to try and stay ahead of everything. In a nutshell, I'm out of money and short on time, but my assumption is that losing the property would destroy my credit and make me a leper in the banking world.

Should I:

Sell ---As is or with duplex/triplex plans?

Salvage ---Find a financial partner or hang on and ride out the process?

Chapter 11 ---Would anyone even touch this?

Or... cut my losses, consider it my RE hard knocks education and start from scratch?

Any ideas? I'm open to anything at this point.