All Forum Posts by: Jose Leanos

Thank you for that, just checked my local city of Long Beach and you are absolutely correct. I cannot operate my ADU as a short term rental.

Hello, 

I am a newer real estate investor from California. I have a question regarding the tax write offs of a long term rental vs an Airbnb rental.

I am just about finished converting my garage into an ADU for a total cost of about 60k(including appliances).

Based on my limited research it appears I will only be able to depreciate these costs over a 27.5 year period if I decided to make my ADU into a long term rental. On the other hand, per my understanding I should be able to deduct all construction and appliance costs if I were to rent this ADU out as an airbnb.

So long term rental would mean 60k/27.5 = $2181 in annual depreciation.

Airbnb Rental this year would mean 60k deduction at 24% tax bracket = $14'400 tax savings.

Am I correct in this line of thinking? Or would there be certain expenses that I would not be able to deduct from the construction cost of an AIRBNB rental.

Thank you in advance bigger pockets community.

Hey David,

I found this super interesting. I am currently working on converting my 350 sq. ft. garage into an ADU in Long Beach, this highly encouraged me to make a post later today to mark my progress as well.

Investment Info:

Single-family residence buy & hold investment in Long Beach.

Purchase price: $435,000
Cash invested: $40,000

Single family residence currently occupied by owner.
Garage ADU conversion house hack

Hi everyone,

I am currently in the process of converting my garage into a 1 bedroom ADU in the city of Long Beach, CA. I understand that everything is backed up right now due to covid, but I was wondering if anybody had any success in getting their city to speed up the approval of plans for any type of construction on their home. Also if anybody happens to work with the city of Long Beach's planning department I would love to connect to find out what I can do to speed things along.

Thanks in advance

@Ben Lue

I would check with the city, Long Beach for example just recently approved the legalizing of non permitted ADU's given it can be shown that the unit it up to code and that the current renters have been there for 2 years and are not being kicked out.

It varies by city but maybe El Monte has something similar

@Brook Alexander

Hi Brook, I was actually in your same exact shoes a few months ago. I had my home for sale and the whole nine yards.

Have you considered working on your ADU by pieces? I just finished a cash out refinance on my home in Long Beach, CA and to get the ADU plans alone has taken about 5 weeks. I still have to wait approximately another 4 months for the city to approve the plans and then I have to go through the construction process still. That said if you are building from the ground up that could add even more time to your process which would allow you to save to pay off contractors. If you are converting the existing garage you might find that working in pieces could allow you to make progress while also motivating you to save to finish up. You should look up realtor Hektor Castillo in LA. He was able to convert his garage for under 40k which is a bit extreme but lays it all out on YouTube.

Anyways hope this helps.

Hello all,

I recently did a cash out refinance on my single family home at LTV ratio of 75-25. I did this with an owner occupied loan.

My intention with the cash that I have pulled out is to convert my garage into an ADU and to purchase a 2-4 unit property within the city of Long Beach to start house hacking(ideally with a conventional 5% loan).

I was wondering what I need to do to get approved by lenders/ underwriters in the very near term despite my new loan being quite literally just a few days old. I understand that moving from a single family home into a multi-family property is something that most lenders do not find believable when looking to underwrite loans, but I am unmarried with no kids and I am really focused on financial independence and I feel house hacking and real estate will help me in achieving this goal. What are the steps I can take to get around this road bump and ensure lending for future real estate transactions.

For lenders, I am looking to get approved for an approximate 650k loan on a duplex owner occupied with a 5% down payment.
I currently own a 640k single family home with a 480k loan on it (Total PITI $2550 per month) Comparable rents $2500 not including proposed garage ADU conversion which should add an additional $1300 to monthly rent.

My income is 7500 per month, and my only other monthly debt besides the mortgage is my student loan($318 per month currently paused).

I have enough in very healthy reserves and I am actually looking to buy a fixer and value add with my excess cash.

Thank you in advance.

Hello all,

I am wondering if anybody that has converted their garage into an ADU in CA has had any increases in their property taxes. I am reading the California real estate principles and it appears that the county assessor does have the right to raise property taxes when improvements are made.

Currently working on submitting ADU garage conversion plans for a SFR I own in Long Beach, CA and I wanted to know if my taxes would be changed in order to run my numbers correctly when calculating expenses. There will be no added square footage, just the conversion of the existing space.

Thanks in advance.

@Kristle M.

Hi Kristle,

Very motivated by your goals this year. I was wondering what type of financing you will be using that will allow you to put 5% down on a multi family property in LA?

I am in the midst of a cash out refinance on my home and I would like to do something similar to what you are doing after converting my garage into an ADU.

Best

Jose Leanos