All Forum Posts by: Luca Shaw
Luca Shaw has started 3 posts and replied 5 times.
Post: Potential Rental with Unpermitted Room
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Hi all,
I am looking at a potential rental acquisition where the home contains a garage conversion into a room and it is unpermitted.
Note that seller has not included this room in the sq footage and i am not purchasing it with the assumption of conversion to permitted.
If i were to buy and turn into a rental - is there any liability to renting it out with that unpermitted conversion? I wouldn't advertise it as a bedroom and would make it clear that it is not to ever be a bedroom, but am concerned about the presence of an unpermitted room in general, but I may be overreacting.
State: California
Thanks!
Post: Providing A/C or let tenants provide
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- Votes 0
Hello,
Have a 2/2 with no AC in southern California. Options are either to:
1. Install window AC/portable AC in the 2 rooms. Cost probably <=$~1k. cheap up front and low cost maintainence.
2. Have HVAC co install central AC or mini splits. Cost ~$10-15k across the few bids I got it.
Is it worth it to get the central for future rent growth? Or just go cheap and do the portable/window?
House is worth ~650k in an in demand area and rent will be slightly positive to P&I but negative to PITI and maintainence. I plan on potentially putting a 3rd bedroom on the house in 1-2 years.
Post: Keep Or Sell Negative Cashflowing Rental - SoCal
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Quote from @Greg M.:
Quote from @Joe Villeneuve:
More important, this $12k/year isn't just $12k/year. There's an exponential effect that cash has that virtual money doesn't have because it is immediate.
Based on the numbers he gave and the expected $3000-$3500 rent covering P&I, it's likely that he has a ~600K mortgage. The principal reduction would average around $710 a month for the first two years.
Assuming a very low 2% YoY rent increase and the increasing principal reduction, he will "breakeven" after three years of renting.
I know you and I are on the opposite ends of how we view investments, but I do find it odd how you can say it is useless unless you sell the property. It's a store of wealth - just like owning a stock that doesn't pay a dividend or a couponless bond. It can be used as collateral, drawn from through a line of credit, or used in a 1031 once enough equity is built up. It also allows for postponement of taxes.
Thanks Greg. You are correct, 600k ish mortgage, so aboyt $710 equity build per month. This is also how I view keeping it and also as a retirement hedge - worst case if i can pay it off I can live there with no payment.
Post: Keep Or Sell Negative Cashflowing Rental - SoCal
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Quote from @Allen Duan:
Echoing Charles here. Run your numbers as a MTR and see how that changes your analysis. We find that furnishing a 2 bedroom with pretty good quality is around $8-10k, a small investment in the big picture. Our properties are mostly in the South Bay, but we have 2 bedroom condos and duplex units renting out for $3500-4000 as MTRs. As a SFH, I imagine you can get more.
Hey Allen, By MTR do you mean something like furnishedfinder? Are there others?
Post: Keep Or Sell Negative Cashflowing Rental - SoCal
- Posts 5
- Votes 0
Hi all,
Last year I bought a 2/2 SFH in a suburb of LA (ventura county) fully intending to use it as a primary home. 30 year fixed @ 5.375%. Recent developments in my career lead me to have to move about 2 hours away. That leaves me with deciding what I'm supposed to do with this property. Its a 50s property but I've updated a ton of things about it. Roof probably has a few years left on it, only real weakness is eventually I'll have some major mainline work needed.
My options appear to be the following:
1. Rent it out. I can get $3000-3500 rent pretty confidently after looking at comps and discussing with various property managers. This would leave me basically cashflow neutral/slightly positive on my P&I but negative after taxes, insurance, and expected maintenance (assuming 1.5% of home value in maintenance per year). After all of that, I'll be ~$1k negative per month but likely hoping for some solid appreciation as a source of return. I can afford negative -1k monthly with this new job but obviously I don't love it.
2. Sell it. I can probably sell it and after fees probably lose 20k or so (as far as down pmt + closing costs + improvements).
Renting (even though negative) seems like a good way to go because I have a good risk tolerance, however I am worried about California landlord laws + unexpected maintenance/capex. Looking for BP community suggestions as this is weighing on me.