All Forum Posts 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

@Corby Goade

Hi Corby,

Quick question. When you move, say every year, do you also utilize the equity in your primary house (before leaving it for another) via a HELOC? I.e, you gather multiple HELOCs as you move each year?

If so, does it appear at a Debt on your credit ?

Thanks!

@Justin Johnson Hi, did you find an answer to your Q? 
Also , do you use apartments.com for the full process? i.e., applicant screening, background checks and rent collection? I am not sure what your thoughts are when cozy merged with apartments.com

 

That is interesting, having a little dance at the time of applying for a loan to show proof of income.
2 questions
Q1. Will having existing tenants in the duplex/fourplex save the investor from having to show the proof?
Q2. For an owner occupied duplex/tri/fourplex, will that be subject to rent control? if you need to increase rents on existing tenants who happen to be way under market?

@Paris Ambush

I have met some people in local Meetups who are doing a house hack. I would assume it’s doable specially here.

I am considering moving out of my Condo to a house hack property too. I haven’t really started the researching locations for it yet. I am also not sure how the demographics will change with Covid. Will the suburban zip codes start seeing more professionals moving there?

@Cirilo Villar thanks Cirilo. I’ll check them out.

Converting a garage would probably be quite a lot of CapEx initially I guess.

would you say a ball park estimate of about $15 to 20k is a fair assessment?

@Ricardo Paredes

Hi, quickQ. Converting a garage to a studio.

Do you need planning permission? Do you only put a bed in it? What about extra electrical

Sockets and any plumbing of any sort? (I reckon not, but would be nice to know)

What generally qualifies as a studio?

Thanks for the clarification Joe. That is very useful. You are correct, it is an Condo and susceptible to a down turn.

a few clarifications to my post 

1. Like you mentioned: 
"Only the interest and insurance portion of a payment is deductible from your mortgage payment." 

Yes, This amounts to  a total of $14000 in 'tax deductible'  annually. I would assume that's about $2800 in 'tax credit' at least depending on the tax bracket.Pl let me know if this assumption is misplaced/overly optimistic?

2. "You would still likely owe well over $2000 in this example."
Losses, like you mentioned would give me Tax deductible of $3000, resulting in a tax credit of $800 to a $1000 approx.

I was hoping these two points alone ( $2800 + $800) would make this investment a net zero.

Any depreciation and repairs that i do would be an added extra. Yes, the prospect of a downturn affecting vacancy is still high. I have assumed 1-month a year vacancy in my calculations. I am sure this is place-to-place dependent. I will look into this more. 

If you were to say, why not look out of state: 
The reason of not going out of state is because it would be my first time investing and it is in the same community. Plus having worked on my own house, I have some contacts for plumbers, handyman, flooring people etc. its not an extensive list of contacts, but a fairly decent starting point i think.

Thanks, Manraj Singh

Hi,

I am aware that acquiring a -ve cash flowing property is a BAD idea. Also aware that we shouldn't be looking at 1. appreciation and 2. tax benefits as an answer to offset a -ve cash flowing investment.

1. I am employed full time and do not own a rental property.

2. I am considering purchasing a property in my neighborhood with -$3000 cash flow in year one. ( after Motrgage, HOA, CapEx, expenses & vacancy)

3. I am currently employed with a W2, and expect to pay $3000 in taxes every year.

Not looking at appreciation - If I acquire this property today, would it not make sense to have this liability and using 100% losses in year 1 to offset my Taxes for a net zero?

Is it reasonable to assume that there might additional tax relief  through depreciation, and expenses etc on top of it? 

I would really appreciate if I could get an explanation ( think freshman college, whom you rather educate and not discourage) about my question. 

Thank you! Manraj

Hi James, 

I did a quick estimate on Gillen & associates properties - screenshots attached. Let me know what you think? did you get a chance to look at some of their numbers?