All Forum Posts by: Justin Gottuso

@Dan Heuschele

Correct. We had this issue with our ADU when we went to sell. I hate the appraisal industry LOL. A $250k to build 3 bed 2 bath ADU which will rent for over $4k per month is appraised at construction costs and compared to other properties sold. Should be treated like a multi family property based on rents. Change takes time. Learned my lesson.

@Derrick Dill I read half of it and didn't read anything about two ADU's being allowed. Maybe it's in the second half? LOL

@Delbert Standifer where is the duplex? What kind of neighborhood? What do rents go for? Is it turn key or needs a lot of work/updates/deferred maintenance?

@Delbert Standifer ok so you’re good to go then? What’s stopping you from moving forward with the deal?

@Krystal Marquez so you can save around $25k per year? You can get two small 2 bed 1 bath houses in the Midwest for $50k each that rent for $650/750 each; focus on finding great deals and partner with cash providers/investors so you own it and get cash flow while they get 7-10% interest and you can get more properties and gradually refinance; get a FHA loan (3.5% down) on the largest property you can get snd live in one and rent the other units; get another part time job or better paying full time job to save and invest more.

@Delbert Standifer seems like it’s a big win for your friend... gets a wad of cash and gets cash every month for 7 years from you. What’s the upside for you? In my experience sellers want seller financing to avoid capital gains taxes and/or they care more about getting monthly income - not that they want/expect a big down payment from the buyer.

I’m struggling with how to value the time I spend working on real estate investing - which will lead to a lifetime of financial freedom.

I started actively investing in real estate in august 2020. We now have three properties totaling 13 units and cash flow $300 per unit on average and over $3,000 per month (all cash, will be refinancing and pulling out equity to invest in more deals soon).

We have about $175k of equity in these properties. Once accessed that’s another seven $100k properties in my market (Ohio) that will cash flow $300 per month per door (units are $30k to $40k per door/$35k average so if four are triplexes at $900 cash flow/$3,600 net per month and three are duplexes at $600 cash flow/$1,800 net per month that’s an additional $5,400 net income per month in addition to our $3,000 now which just about gets us to our financial freedom goal of replacing our W2 incomes of $9k per month and covering all expenses. That’s just using the equity we currently have and not counting future cash flow that can be applied to more acquisitions.I get leads on about to these high-quality numbers deals per month from two primary sources who are mentors and friends with way more experience and success than I have. I get leads on about two of these high-quality numbers deals per month from two primary sources who are mentors and friends with way more experience and success than I have. So I estimate I can get these additional seven properties within the next 12 to 18 months if things with financing go well. This does not factor future partnership deals with Cash Providers/private money lenders, just the deals we can do on our own at this point.

So, if each of these $100k deals will average $750 per month and $9k per year of income forever, but let’s say 30 years, that’s $270k in 30 years (let’s assume problems arise and I lose 30% of this and it’s $200k of income - this doesn’t factor in raising rents at all though, or accessing built up equity over time). If initial hours finding and acquiring and possibly rehabbing is anywhere from 10-100 hours depending on how much work is involved let’s say each deal needs 50 hours of ‘work’ on the front end. Then I have management in place and spend 1 hour per week in talking with the manager, paperwork, research etc. To keep it simple say it’s 50 hours for acquisition then 50 hours per year after that. That’s 1,550 hours over 30 years (50 acquisition + 50 per year x 30 years). The 200k of income divided by 1,550 hours over 30 years is $129 per hour.

The hours given to owning/managing the property can be significantly lower as more and more work is delegated to a team of people vs doing it mostly all myself. So I’d think a 50% reduction to 750 hours is possible making the per hour rate or $267 per hour. Another way to look at it once the property is acquired might be I earn $750 per month for 4 hours or less per property so about $200 per hour. That could be doubled with more efficient management of time so 2 hours per month and $400 per hour.

What do you think of my reasoning/logic, numbers/calculations and conclusions/results? Anything you’d add or change?

Thanks so much!

@Magdaleno Garcia ask your licensed contractor and electrician.....

@Jeffrey Palmer I've gotta say this because nobody talks about it: a Tiny House On Wheels qualifies as an ADU in Los Angeles. Benefits are lower price, can buy ready made to save time and buy from retailers that can also do financing, and you save your garage which preserves resale value and storage space - while collecting about the same in rent as if you had a studio garage conversion. We built a 1200 sq ft 3 bed 2 bath ADU in Westchester near LAX that cost $250k. If I would do it again I would have gotten a tiny house. Clear $1k per month in net income while keeping the garage and backyard and used the other money to renovate the front house or buy another rental property.

@Delbert Standifer construction lenders don't really touch the ADU's in my experience. Private lender like SoFi is what we originally used since we didn't have enough equity built up at the time yet. I think it was around 8% interest. If it's just a garage conversion that's easily done in 3-4 months that's not too bad. Then once it's rented out some lenders will let you use the income to increase the property value and refinance. I've got a lender contact if you need one for that at some point.