All Forum Posts by: Julian Martinez

Anyone have advice or experience with the following?

Here's what's happening-
I've ended up in a situation where the owner of the construction company I hired to build our ADU had to fire the project manager on our job because the PM did some shady stuff. And due to their internal strife, my project is now almost 2x over schedule and over budget.

We took out a HELOC to finance the build and only draw once a milestone is met. The milestones came fast and furious in the beginning- we started in May, had 80% of the work done by July, looked like we were going to be completed by August or September, which meant 80-90% of the HELOC had been drawn down by Sept. ONLY then did the internal strife start- and all work stopped once the strife started while the owner accused the PM of malfeasance, PM went rogue and made decisions to install things that didn't pass inspection, all the while, the meter is running on that HELOC balance. And now here we are, it appears we're close to the finish line, but the new PM has no idea where the last PM left off and is not making much progress on what remains, so while he tries to catch up, this is obviously costing us a sizable amount- not just the holding cost (000’s of $ per month) but also the lost rent.

Has anyone had to negotiate with (and/or threaten to complain or sue) your construction company for going WAY over schedule/budget on a project due to internal mismanagement within the company? Or withheld final payment to offset your expenses?

I've held back the last 10% of the project in case I need to hire a new company to finish the work. I’ve racked up a bunch of unexpected expenses while I wait for the construction company to figure out their issues- it feels unfair to bear the burden of those added expenses alone when this is not my doing. I plan to discuss with owner of the company some form of agreement about how we're going to make this right but if he's not willing to negotiate, I may have to resort to filing a complaint with CSLB and/or ultimately, threatening to litigate (which I likely wouldn't do since it's a lose-lose). 

Any advice or insights would be so appreciated.

 Thanks so much for your take, Greg! I've had a hard time coming to that realization, it's a home with sentimental value that we figured we'd keep forever to give to our kids, but that's the parent in me. The investor in me has to be wiser about the decision and not worry about sentiment, look to reinvest in something else that will perform better for my family's future. 

We’re debating whether to sell our first primary residence or keep it as a rental. It’s a beautiful custom home, one of the nicest in a so-so Oakland neighborhood ("biggest house in not the best area").

Here’s the context:

• - Bought in 2014 for $590k, appraised in 2022 for $1.2m.
• - Located in a C- to B neighborhood—close to amenities and mostly safe but not for everyone.
• - Converted to a rental in 2024; initially rented for $4,750/month, but tenants moved out, and the soft Bay Area rental market has made filling it challenging. We’re now listing at $4,295/month.

Financial details:

• - Loan balance: $640k on a 30-year fixed @ 2.85% (PITI: $4,020/month).
• - Selling could yield $400-$600k, mostly tax-free, if sold by spring 2025 while within the 2 of 5-year capital gains exemption.

Options:

1. 1.) Keep as rental: Rent comps range from $3,800–$5,000+. The home is above average for the area, but rental demand has been tough. Current listing at $4,295/month is getting some interest.
2. 2.) Sell: The home is stunning, with features like a 2-story wall of windows and a central, convenient location. However, neighborhood limitations may cap future appreciation. Proceeds could be reinvested in better-performing assets across multiple doors.

Our goal is to build appreciation over cash flow, acquiring 1-4 doors/year to allow my wife to retire by 50. I’m a real estate professional, and we benefit from tax strategies.

Would you sell or keep renting? Any advice would be appreciated!

We are debating between selling our first primary residence or keeping it as a rental. It's a beautiful custom home, one of the biggest and easily one of the nicest homes in a so-so neighborhood of Oakland, CA (i.e. "biggest house in not the best area").

I could really use some advice on best strategic investment decision here- if you were in my position would you sell or keep as rental? 

For context, here's the home https://www.zillow.com/homedetails/943-34th-St-Oakland-CA-94...

We bought it as our primary in 2014 for $590k and realized a nice run up in appreciation over the last decade, appraising most recently in 2022 for $1.2m. 

The home is in a C- to B neighborhood, depending on the person. For me personally, I consider it a B neighborhood because it's walking distance to so many amenities, and I felt mostly safe raising my family there, but not everyone is comfortable living in a developing area.

Last year (2024), we moved out of the home and converted it into a rental. We were able to rent it out for $4,750/month the first year but the tenants moved out at end of lease in October, and we've been trying to fill the property since. The Bay Area rental market has softened, especially in Oakland, so we are not able to get $4,750/rent right now.  

I'm trying to decide the smart investment decision - continue renting it out at a lower rental rate OR selling it and trying to find a potentially better performing asset to re-invest those funds in.  

Our loan balance is $640k (rolled a HELOC that we used to buy a triplex into the primary mortgage back in 2020) on a 30-year fixed @ 2.85%. So our PITI on the home is $4,020/mo.

Keep as rental- Market comps suggest a wide rental range - $3,800-$5,000+. We initially listed it at $4,795, but got no interest. We've had to keep lowering the price to where we're currently listing at $4,295/mo, which is generating some interest. I just received an application from someone who meets the income requirement (3x rent) but not the credit rating requirement. But it is not an easy home to fill given the rental rate is above average for the neighborhood (but well below average on a $ per sq ft basis). 

Vs. 

Sell the home- I would keep the home vacant and wait until spring season to sell. It’s hard to tell how much it would sell for if we wait for spring 2025- the Bay Area market has seen some softening, but unbiased, the home is AMAZING. Everyone who steps inside is wowed by the space and in awe of the 2-story wall of windows surrounding a 140+ foot redwood tree. You really don't see many homes like it.

And it's in a super convenient, central location, closer to downtown San Francisco than most of SF neighborhoods, and easy access to the whole East Bay. But again- the neighborhood is not for everyone. 

We’ve already benefited from the rapid appreciation and from here on out, I think it will be flat or very modest growth. We're still within the 2 of 5 year capital gains exemption period, so if we sold, we'd be walking away with $400-$600k mostly tax-free. 

So I’m trying to see if I take that equity off the table and re-invest the sale proceeds in another market across more doors where we’ll see better appreciation, OR if we continue keeping it as a rental and work on principal pay down even though the rental price has been coming down and the home is not the easiest to fill because of the above average price for the C- to B neighborhood.

Ultimately, my stated goal has been to build appreciation (over cash flow) by acquiring 1-4 doors per year for the next 10 years to allow my wife to retire (or be work optional) by the time she's 50. I'm a real estate professional and she's a high income earner, so together, we're able to take advantage of some great tax strategies through real estate. 

Any advice or opinions would be appreciated. Thanks so much in advance.  

We're actually in unincorporated WC as well, Dustin- so all of our applications and communication go through CC County in Martinez. 

I do know that laws are constantly changing, and it looks like you might be able to do what you envision as of January (screenshot taken from this link). 

I found it really helpful to enlist the help of Realm Home (https://realmhome.com/). They'll do a lot of initial legwork and feasibility analysis, which is especially helpful if you're just getting started. And their onboarding fee is minimal ($200-$500) and becomes fully refundable if you end up hiring someone from their vendor marketplace. I'm not a paid endorser, btw, but I just think there's good value add and I just hired our contractor through their network so I've benefited from their services. 

Happy to chat more if you have questions about any of the above. 



 

Hey y'all- 

I'm in the process of converting a workshop on our property into an ADU, and would love to chat with someone local who's done this or something similar.

The property is in the City of Walnut Creek, but our address is technically in unincorporated Contra Costa County, so all of my permitting and inspections are being done through Contra Costa County. 

Our plans have been stamped by County Planning, Fire Protection District and Central Sanitation, and we're currently under review with County Building. I'm going through underwriting with Renofi for the financing. I've signed with a contractor (Modern Green Construction) to develop the ADU, I was referred to them by working with Realm Home. So I've talked to lots of folks who will help me get this done, but no one who has actually done it themselves.

I'd appreciate the chance to speak with someone who's done this- ADU development- in this area, either in the City of Walnut Creek specifically and/or someone who's had to experience with being in an unincorporated county area in general.

Thanks in advance, it's so great to have this community as a resource!  

Hey Tej- I confirmed with my accountant and financial planner, bonus depreciation doesn't apply to foreign STR. Makes sense when thinking about it- the US offers that as an incentive for investing on US soil, I don't think the govt wants to actively encourage foreign investment by giving us a domestic benefit. So in my case, it made the math not work out, so I passed up on the opportunity to buy in La Paz, Mexico.

 @Michael Baum - thank you for looping in Mike!

@Mike Lambert - that would be great and much appreciated. Will drop you a note. 

In talking with my CPA, the biggest downside is that I lose the chance for bonus depreciation, so I'm left with the slow, steady 30 year depreciation schedule on that property. But he's admittedly not well versed in the matter, so I'd love to chat with you. 

Hey all, are there any real estate professionals who own an STR in Mexico and would willing to chat for 30?

I've qualified as real estate professional since 2021 and just found a potentially good opportunity to acquire a property in Mexico that would make for either a solid STR and/or eventually our forever home.

I'm completely new to acquiring a foreign property- how to finance, what purchase process looks like, how foreign STR is taxed, does real estate professional status matter, etc.

I'd really appreciate talking with someone who has done/is doing this- REP with STR in Mexico- to learn about your experience.

Thanks so much in advance! Happy to share some of the multi family market research I have been doing US in return. 

Totally hear you. That's what I'm working through now. I did find a bank that does 60% DTI, so that would help. But also, if you convert to rental and can show rental history or a rental agreement, most lenders I've spoken to said they'd give you credit for 75% of the rental income in the first year, and then they'll look to what you reported on tax returns after that first year and credit you with that, which helps your DTI.