All Forum Posts by: Kenan Heppe

The question is, multi-family to whom? The assessor considers my parcel multi-family. They use code 200. The CITY considers my lot multi-family, because they impose rent control. But the zoning is LAR1, single family. I have two units, two addresses. Are they two primary units, or is my second unit technically already my allowed ADU?

Is this possible in the city of LA?

Hey, thanks for the reply. Both units have tons of permits. Both have certificate of occupancy. Both have been on the property for more than sixty years.

Nothing illegal is going on here, that's for sure. It's legal non-conforming, as of now, as far as zoning is concerned. The question is how to justify a garage conversion ADU, if at all possible.

Hey BP World!

I have a duplex, which consists of two detached units, as well as a detached garage. On ZIMAS, though, one can see my property is zoned LAR1. However, it’s assessed as a multi-family (duplex). 

The main house was made in 1921. The second house in the 1930s or 40s. In the appraisal, it’s shown as “legal non-conforming,” which implies it used to be zoned properly, but now it’s not. 

My question is, is it right to describe the property as a duplex? Is it a “legal duplex”? Is it a “legal non-conforming duplex”? What’s the best, legal description? 

Calling it a single family home isn’t right. It has two separate addresses, and two certificates of occupancy.

Originally, I was hoping to do a garage ADU conversion. But I think I won't be able to, because it's LAR1, and I technically already have a second unit built? Would my second unit, as far as zoning is concerned, be considered my "ADU"?

Thanks!

Hey Sam,

Welcome to BP! Also, congratulations on deciding to take the plunge into the world of real estate investing. You're brave, and wise! I started with a condo in Los Angeles, and eventually did what you're hoping to do: I bought a duplex (east Hollywood, in Melrose Hill), and I'm living in the tiny back unit, while I rent out the large house in front. We have a garage on site for future ADU conversion. I actually became a real estate agent after this process, because the agent who was initially helping me turned me onto house hacking, but he ended up being quite rude and not very helpful otherwise. Make sure you work with someone who really deeply considers your personal needs, alongside the broader economic conditions of the country, AND the local laws. The agent who helped me in the past was trying to get me interested in a triplex that was rented to tenants protected by rent control (one was previously non-paying due to COVID). And he wasn't realistic in calculating the potential danger of such tenancies. Definitely check out local laws, and buy a completely vacant property if you can. If the property isn't vacant, make sure you understand what your rights are as a landlord in the specific neighborhood on which the parcel lies. He told me I was passing up a great opportunity (which is quite funny, because that property is still on the market more than 365 days later, lol!). I became an agent so I can help detail-oriented people like me get into the weeds of the analytics and strategy, without feeling judgment.

I recommend finding a multi-family property that has a decent garage already on site, because paying for a conversion will be much cheaper than building an entirely new building. Let me know if you ever want to chat! 

@Kevin Hill, Thanks for that information! Is it possible to take a DSCR loan on a multi-family property, in which I am also the owner-occupant? If my LLC is the borrower, but I live in it, does that still count as owner-occupancy?

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $1,210,000
Cash invested: $322,000

I purchased a vacant Hollywood duplex for 1.21M, 20% down, at a 3.24% rate. I am 50% owner, as an owner-occupant, and a family member of mine is a 50% owner, non-occupying co-borrower. The main house is a 4+2, and the back cottage is a 1+1, no shared walls. Each residence has its own address. There's a 10'x19' garage (built in 2017, with a certificate of occupancy) that can be converted into an ADU. The deal was that I put 45% of the down payment in, but get 50% equity because I'm PM.

What made you interested in investing in this type of deal?

I moved back to the U.S. after living in China, which for me meant a lack of job security in the short term. My wife is from Russia, and waiting for her work permit. So, we were only interested in a deal that would allow us to rent out a larger portion of the property than we were using for ourselves, resulting in a much lower monthly cost of living (if the property wasn't in disrepair).

How did you find this deal and how did you negotiate it?

Found this with an agent, and negotiated the deal while I was traveling through China and Russia. It was a living nightmare, but we got it done!

How did you finance this deal?

Conventional financing, with a family member as a 50% owner, non-occupying co-borrower.

How did you add value to the deal?

We upgraded the property to match modern standards of renters in the area, and we will later convert the garage into a legal JADU.

What was the outcome?

The final outcome has been fantastic. We have great tenants who are very respectful. On their birthdays, I give them gift cards and periodic treats for their dogs. My wife and I are enjoying Hollywood without the terror of a huge monthly payment, while I re-organize my life and transition all of my work from Asia back into the States again.

Lessons learned? Challenges?

We used a property management company to lease the front unit. They didn't look deeply into the applicants. I.E.: They signed off on a man who was lying about his cash reserves. Only because I myself spotted an error in his bank statements (Battle Ground, WA spelled Battle Groung, WA) did we realize he was lying (confirmed by Wells Fargo). They initially didn't want me seeing the lease that tenants were signing, either. Imagine that! Once I saw it, it had many errors. Check EVERYTHING yourself!

Thanks, @Joe Scaparra. A realtor is able to show me the most recent land value assessment. But how is it assessed? Unfortunately, I can't go off of the most recent assessment, because it was too long ago.

Hello everyone!

I'm analyzing a duplex deal in Los Angeles, CA, and I'm trying to estimate how much I'll be able to depreciate in taxes. For this, I obviously need to be able to separate land value from the building value. How is this done? The last time the house was sold was in the 1980's, so the assessed value was much less than market price today. I can't find a straightforward formula on the LA Tax Assessor website. Any help? Thanks!

I've also read this in some places, but I'm having trouble locating the explicit law.

@Ebony Bryant, did you ever find the official literature?