All Forum Posts by: Marc Sinnott

Hi Raefield,

Congrats on getting your first triplex, that's huge!

Regarding vacating one of the units for yourself - This varies depending on your area. In my market (Southern CA) for example, a new owner can relocate a tenant if they plan to live in the unit themselves, or have an immediate family member live there. Under these circumstances the owner can legally evict the tenant, but would have to pay them some relocation costs, which depend on a number of factors like whether the tenant is elderly, disabled, low-income, if they have any dependents, etc. It could also be an issue if you have another vacant unit available... it's harder to make the argument that you NEED that particular tenant to vacate.

I would start by researching the basic landlord-tenant rules in your jurisdiction (city, county etc) and any rent control laws that may be in place. Be careful as there might also be some extra Covid eviction bans or tenant protections in place that would make this more difficult. It may also be worthwhile to connect with a local real estate broker or attorney who specializes in landlord-tenant.

Good luck!

Hi Edwin,

As a general rule in Los Angeles with SFR, a nice ADU can easily add $100k of value or more. I've been seeing more and more listings that have ADUs on the market, even including small multifamily, so it should be possible to find comps. However, with a duplex or any multi-unit, the valuation is based more on the income and specifically the NOI, rather than the comps. An appraiser would likely use the income approach for multi-unit, whereas they would use the sales comparison approach for single family.

So rather than looking for a rule of thumb, the real question is how much income could the ADU add to the bottom line? Let's say hypothetically the additional unit can rent for $1,200 per month, and after expenses it will add $10,000 per year to the property's overall NOI. If you spend $100,000 on the ADU, then that would equate to a 10% ROI in the first year.

Then, let's say you are assuming a 5% cap rate to value the property. So, a property with 50,000 NOI would be worth $1MM based on a 5 cap. If the ADU add can $10k per year, then it brings the total NOI to $60k, which at a 5% cap brings the property value to $1.2MM. So, the $100k ADU has effectively increased the value of the property by $200k. Of course this is a very rough example based on a lot of assumptions, but hopefully you get the idea.

I would start by researching the market cap rate for small multifamily in your area, and pull lease comps to get an idea of what the ADU could rent for. Then once you know the numbers you can work backwards to see what the value-add would be.

Good luck!

The City of Los Angeles Rent Stabilization Ordinance (RSO) applies to multifamily (2 or more dwelling units) properties that were built before 1978. In the city of LA a single family home would be exempt. Rancho Palos Verdes is an independent city, and it does not appear that it has its own rent control. However, I would recommend reading up on the new California statewide rent control that was recently passed. I believe this went into effect at the start of this year, and it imposes rent stabilization on any municipalities that did not already have their own rent control in place. My understanding is that the statewide rent control law does not include single family dwellings, unless they are owned by a corporation or a REIT. However, the CA statewide rent control is also significantly more lenient than LA in terms of rental increases - it allows for annual rental increases of 5% plus the CPI, up to a maximum of 10%.

A little light reading:

https://hcidla.lacity.org/RSO-Overview

https://la.curbed.com/2019/9/24/20868937/california-rent-control-law-bill-governor

Good luck!

I'm not currently invested in Cleveland, but planning to invest out of state in 2020 and OH is one of my potential markets. Looking forward to chatting with / picking the brains of other investors!

Hey Michael, Congrats on your first successful BRRRR! The beauty of this method is that it leaves lots of room, so even if everything doesn't go perfectly the deal can still be a success story.

I'm curious, if you'd like to share - what is the cash flow after expenses (utilities, gardener, maintenance, property tax, property management?), and what is the ROI on the 14K you left in the deal?

Hey Hannah,

Thanks so much for jumping in on this thread!

So full disclosure, the private lender on this deal is a family member. They will be receiving monthly principal and interest payments going forward, so I wanted to establish a practice of sending out some sort of regular statements which state the amount being paid and the remaining loan amount, etc. They do not have any specific requirements, so it's up to me to come up with the statement format and frequency. But I want to come up with a convention now and stick to it, so that I'll be able to do the same on future deals with other investors!

Have you (or anyone else reading) ever generated monthly statements for a private (non-professional) investor?

Cheers,

Marc

Hi all,

I recently completed my first single family rehab project (!!!), which I turned into an unintentional brrrr and ended up renting and refinancing.

I have a private lender who will be receiving monthly payments of principal and interest going forward, so I wanted to pick the brains of some of the more seasoned investors out there about the question of reporting.

Do you send regular statements to your private money lenders? If so, do you report monthly, quarterly, or yearly? I'd like to have some way to track the amount of principal and interest being paid each month, as well as the remaining loan balance. If you have experience issuing these types of statements, any input would be appreciated. And if anyone has access to simple forms or templates for this, that would be great too!

Also, I'm assuming that I will need to issue some sort of year-end statement or 1099 so that the lender can report the interest income on their taxes. Any input on this would be welcome as well.

Alternatively, if anyone knows of an existing forum thread that covers this topic, please point me in the right direction! I have tried searching the forums but haven't been able to find specific posts on this.

Thanks in advance!

Marc

Alternatively, if anyone knows of an existing forum thread that covers this topic, please point me in the right direction! I have tried searching the forums but haven't been able to find specific posts on this.

Thanks again!

Hi all,

I recently completed my first single family rehab project (!!!), which I turned into an unintentional brrr and ended up renting and refinancing.

I have a private money lender who will be receiving monthly payments of principal and interest going forward, so I wanted to pick the brains of some of the more seasoned investors out there about the question of reporting.

Do you send regular statements to your private money lenders? If so, do you report monthly, quarterly, or yearly? I'd like to have some way to track the amount of principal and interest being paid each month, as well as the remaining loan balance. If you have experience issuing these types of statements, any input would be appreciated. And if anyone has access to simple forms or templates for this, that would be great too!

Also, I'm assuming that I will need to issue some sort of year-end statement or 1099 so that the lender can report the interest income on their taxes. Any input on this would be welcome as well.

Thanks in advance!

Marc