All Forum Posts by: Manraj Singh

Yes the goal is to rent this ADU out. It is true, that a current ( lower) value may not affect the outcome. I was curious to see if a lower valuation from an appraiser would also be an indicator to lower rents!

I am currently basing the rents on the comparable local market with 2Bed1Ba with roughly the same sq footage . I have not factored in this "3/4" bath . From what I can gather so far, I don't it plays an important role, but just wanted to check with the larger community.

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Hi,

I am in the planning phase of an ADU.

I am planning to have 2 bedrooms and a full bathroom (sink , toilet ) with a shower cubicle instead of a full bath + shower. I figured a shower cubicle is probably easier to maintain than a bath tub.

However, I read somewhere that a full sized shower cubicle instead of a shower bath is considered “3/4th” Bath. This seemed a bit bizarre (yet insightful).

When in comes to appraisal or valuation of a house,

Is having a (full size shower cubicle ) = having a (full size shower & bath tub)

What do you reckon?

Thank you,

Manraj

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Investment Info:

Condo other investment.

Purchase price: $385,000
Cash invested: $20,000

Bought a primary residence and updated the kitchen , flooring, HVAC and WH.
Rented out after living in it for 3 years. It is a 2 Bed 2 Bath condo in Rancho Bernado area. The Condo does not cash flow positive after OpEx and CapEx. so keeping this unit under self-management till the market rent covers all the expenses.

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

It is a nice , class A neighborhood with good schools

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

Found it via a Realtor. Did not negotiate. It was a sellers market ( in apr 2018) when i bought.

How did you finance this deal?

Conventional 10% down payment

How did you add value to the deal?

Remodeled kitchen, appliances, flooring, HVAC, WH and paint.

What was the outcome?

Property is in a desirable area , so lots of demand. It is currently rented slightly above market rent.

Lessons learned? Challenges?

Lessons
1. Keep my cash reserves high.
2. get a HELOC first and then move out of the primary residence to have access to the equity.
3. Be wary of HOA properties. Eats into cash flow so easily.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, I did. I would recommend my agent at the time

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Hi Justin,

Thanks for the response.
Quick questions on LoCs. What would you suggest Getting a credit card vs Personal Line of Credit? Does it matter for DTI or future loan financing applications?

PS:
I recently opened an account with First Republic. They offer about 2.7ish% Personal LoC if I maintain certain amount of balance in their checking account. I figured I have to keep some back up cash for my rental anyway, I might as well keep it in their account.
However, at the time, I had lost the HELOC ( due to a ReFi) and I needed access to credit. so i opened it - without too much research into it.

Originally posted by @Justin Phillips:

@Hanan K. I would definitely start with your primary, as that's where you'll typically get the most access to equity. My wife and I ReFi'd our primary into a very specialized, 1st position line of credit. It's tied to a zero balance sweep account, so our regular banking saves us a ton of interest cost. Along with that, we have access to our equity for 30 years, so this one loan will fund many deals. It also greatly increases flexibility, and lowers DTI, among other things. It's been a great tool for us.

1. Open lines of credit, like credit cards, don't affect your DTI. Only outstanding debt balances contribute towards your DTI.

2. If you find a great deal, definitely pounce! Otherwise, it's a good time to start getting funds and credit together to prepare for when the market eventually turns. Whether you find that deal in 1 month or 12, it never hurts to be prepared. As long as your credit isn't right on the edge, lining up capital is a good place to start.

3. Each property will have it's own underwriting/processing. It's definitely simplest to do one property at a time. After each property done you'll have the documentation ready for, so they should get easier and easier as far as the processing goes.

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Hi @Geo Cruz ,
Intresting.

Can you please elaborate wat you mean by " rental market in my particular neighborhood was not quite receptive of an ADU." . Did you have prospective tenants not keen to rent an attached ADU to the main house?

Also, regarding your Vista property, was your plan on buy-&-hold to rent or to sell off the unit once the ADU was complete?

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San Diego, California

Hi Andrew,

I had stumbled on your project (dated 3 years ago) in National City where. Just wanted to get in touch with you about how it went.

I am currently working on a project ( in Vista) where I am planning to add my first ADU to a Single family house. I am unsure on how the property taxes will be calculated on the whole property ( SFH + ADU) after the construction is complete. Are the new taxes based off on the new appraised value of the lot or just the cost of construction of the ADU? How did yours turn out?

Thanks! Manraj

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Hi Dan,

Thank you so much for your time. Really appreciate the input on this.

"The appraiser comped the house (it was a 3 BR, 2 Ba) and valued the ADU similar to low value footage such as office space. So the comps were other 3/2 SFH "

I think I may have overestimated how the comps would work for a property with an ADU. Not that I am looking to sell the place anytime soon, but I would definitely want to access the equity, say a HELOC, in future for other projects.

I'll find out with the city. i'll give them a call

Thanks, Manraj

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San Diego, California

Hi Dan,

Thanks for the reply. Would the appraiser only appraise the value of the ADU and not the whole plot ( house + ADU).
I assumed if I added a 2 bed ADU to my 3 Bed house, the appraiser might want to run comps with houses with 5 Beds. Well atleast in that ball park.
A $50k appraised value would be quite bad IMO.
In any case, despite the negative equity ( as mentioned above), did you get the expected cash flow from the rental ? ( for a 1 Bed ADU that was eventually built)?

Originally posted by @Dan H.:

Originally posted by @Manraj Singh:

Hi, I recently bought a SFR with a detached garage. The plan is to convert the garage to a rentable ADU. I am in the stage of finalizing the plans before sending over to the city.

I am contemplating either a 1Bed1Bath with patio vs 2Bed1Bath with no patio extension. On Paper, the 2Bed1Ba extension makes more sense but I am not convinced having no outdoor space would attract long term tenants.

I would like to get in touch with someone who has run the numbers for their ADU/Granny Flat in north county San Diego.

Thanks, Manraj

My initial protege had a property that had a garage converted to ADU in escondido. The ADU would have had a hands off cost just over $100k (before wood prices shot up). It was a 1 br with small living room and had extra little room built (not part of original garage that was a pantry and laundry area. He did not build it hands off, so he had significantly less than $100k invested. It was valued by the appraiser at ~$50k.

Make sure their are comps that justify the costs of the ADU addition. It would suck to start with a huge negative return. This negative return could consume years of cash flow.

by the way both his units had their own yard space. The parking was tight.

Good luck

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San Diego, California

All Forum Posts by: Manraj Singh

Manraj Singh has started 11 posts and replied 44 times.

Post: Valuation or Apprisal of an ADU

Post: Valuation or Apprisal of an ADU

Post: Valuation or Apprisal of an ADU

Post: Valuation or Apprisal of an ADU

Post: 2B 2Ba Condo primary residence

Post: HELOC affects on DTI - question!

Post: Any body doing ADUs ( granny flats) in Vista, San Marcos

Post: national city triplex +ADU Project

Post: Any body doing ADUs ( granny flats) in Vista, San Marcos

Post: Any body doing ADUs ( granny flats) in Vista, San Marcos