All Forum Posts by: Justin Gottuso

Thanks for asking @Dan Mackin! And what are your answers to these three questions?! 

1. What's your strategy? Not sure what you'd call this, but when we bought our sfh back in 2016 California had just passed the Accessory Dwelling Unit ADU law. We are about 8 weeks from completion of our 3 bed 2.5 bath 1180 sq ft ADU and plan to sell, capitalize on nice appreciation and value add of ADU. Hopefully selling this summer! (considered refinancing and renting it out but after refinancing and costs we'd be losing money each month with 7k mortgage+2k in expenses per mo with about 8k per mo in rent, plus don't want to worry about vacancies with such a high mortgage). Then we are moving soon to Columbus, Ohio (better quality of life for our young family, wife's brother and his family are there, my sister and family are in North Carolina).

Once we have cash from the sale of our LA property will be exploring options for what to do next with investing. My wife will be in LA for work still often so thinking about purchasing a condo in good area that can appreciate well/BRRR and sell in 4 years or so after my wife's contract with her organization is up. Also considering duplexes (50-75k range) and 4 unit complexes in the Midwest (100k-125k range). We have many friends who are Phd's, MD's, lawyers so thinking one day to do syndicate where I use their resources to invest in larger multi families and sfh's in growing areas like Cincinatti, Indianapolis, Orlando. BRRR makes sense to me too since I've seen the power of buying and holding for 4 years while market was climbing fast and (hopefully) make a great return, so sfh's in rising price areas seems like a good way to go too. A good friend of mine flips but that's probably too much work/projects to manage as I work full time already but not ruling it out. Goal is to own 50 properties and earn 200k per year from them, hopefully in 10 years or so (but it might take 20 lol). I am new to intentionally learning about all these strategies and am new to the Bigger Pocket's forums/community but excited to learn from everyone - and connect with fellow Millennials :-)

2. How long have you been investing? With my own money? Never. And you could say I won't be really investing until we sell our sfh and use that money to buy our own properties. But I also think of it in that I researched and convinced family to help us buy our sfh 4 years ago and saw the market going up and the opportunity of doing the ADU. We've also sucked at saving, but this is a top priority with our move to Columbus: lower cost of living and SAVING 2k per month or more plus the profits from the LA property sale (hopefully).

3. What has been your biggest lesson? Partnership is the foundation for everything, and with shared values and goals great things are possible!

Hello! My wife and I bought a 3 bed 1 bath well maintained sfh in a great area of LA four years ago as the market was rising. Both sets of parents contributed to the down payment. Then California passed the law legalizing Accessory Dwelling Unit's (ADU's) in January 2016. Seeing the opportunity I secured additional funding and we are 6-8 weeks away from the ADU completion. Here's the thing, it is 1180 sq ft, 3 bed 2.5 bath ADU. Original plan was to house hack and live in the new house and rent out the front until recently when we decided it is time to leave LA and move to Columbus, Ohio where my wife's family lives and where we have more social support and lower cost of living and less congestion - LA is a beautiful and exciting place, but insane to raise a family. There is nothing like our property on the market (yet) as the vast majority of people doing ADU's simply convert garages and maybe build out to 600-800 sq ft. So, very soon I will have 'two on a lot' yet it is zoned R1 single family. I've spoken to two different appraisers in my area who have ADU experience and they scratched their heads and didn't know what to tell me since there is nothing like it out there. Since the lot is R1 it cannot be compared to duplexes they say. Any advice about selling unique properties that do not fit into traditional market boxes?

Other helpful details: 

Purchase price in 2016: 755k

Median market value today for original house: 950k

ADU construction costs: 300k

Estimated value after ADU is completed: 1.3-1.4m. But not sure. New flips that are 3 bed 2 bath that are 1,700 sq ft sell for 1.35-1.45m in our neighborhood and small 3 bed 1 bath homes sell for 950k median in our area. We already had an interested buyer willing to offer 1.35m before their funding fell through, but that was the top of his loan limit.

Bottom of market rents: 3,500 for older front house and 4,500 for new ADU/8k per mo

We debated whether to keep it as a rental or sell it. The numbers didn't seem to add up to keep it as a rental. After refinancing our payment would be about 7k per mo, plus taxes, insurance, repairs and property management (since we will be out of state) expenses seem to be about 9.5k per mo with rents right now likely being around 8k, but increasing over time as Google and Facebook have offices 2 miles away, giving our area the nickname 'Silicon Beach.' So doesn't look like we will be cash flowing on it. I'm sure it will appreciate well over time since ADU's are still new and in 5 years there will be more properties to compare it to for appraisers - but we are not comfortable with covering vacancy costs that could be up to 7k per mo. So, selling and cashing out on 300-400k and re-investing seems like the smarter move at this point (I am considering ways to invest the money, but that's for a future post as I need to get the property sold in the first place). I am open to advice and thoughts to think about my situation in ways I have not thought of before. Thanks!