All Forum Posts by: Mark Doty

I attended this 2-day program in LA in Aug 2024 and it was very disappointing.  I left early thinking it was a huge waste of time.  For $1K, he did almost the exact same presentation with very little added detail over the two days. I think you have to join his coaching program for $22K to get any real value.

Hey Alex, I'm interested in meeting other people in the ADU development space. I do these purely as investments and would collaborate with others to discuss challenges with finance and ground up construction.

Investment Info:

Small multi-family (2-4 units) other investment.

Purchase price: $570,000

Commercial Multifamily Development. We are turning a single family residence into 23 apartments using the new ADU regulations in San Diego.

Join us for the Project Walk-throughs to hear about the project and network with other investors and professionals in the ADU space. Join the email list on our website to learn about the details. DotyCapitalGroup.com

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

San Diego is a unique market and difficult to cash flow because pricing is so high. However, the new ADU regulations allow investors to add units. When you focus on adding value and have the time (and capital) to build units, ADU deals pencil...even in California!

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

This was a distressed MLS deal. They wouldn't take my first offer but I stuck with it over time and asked the agent to represent my side of the deal in addition to the owner. Eventually, they came down a little bit and we came to terms.

How did you finance this deal?

This was financed with a hard money loan that had construction funds built-in. Phase three of the project will be funded with private investors and a construction loan.

How did you add value to the deal?

Entitlement is the key to ADU deals in San Diego. Identifying zoning where you can add more than 3 units and finding properties where it makes sense is not easy but is definitely worth it! I target multifamily zoning near the trolley or major bus stops.

What was the outcome?

Phase 1 (Rehab) is coming to a close in Q4 of 2023. It will be rented during the entitlement phase (most of 2024) and construction will follow. End results are TBD.

Design will have quite a bit of variation depending on who you hire to draw the plans and submit to the City. I hire people who have worked through the process and understand the intricacies of the San Diego multifamily ADU regulations, which is a pretty specific niche. I budget roughly $75K for plans and permitting (for ~3 units). If I were a homeowner looking to put an ADU in my backyard, $30-40K would be reasonable. You can do it for cheaper, but you'll probably get what you pay for. The fee schedules are generally based on square footage and unit count and are listed on the DSD website.

The fastest I can image getting through the permitting process, with absolutely no corrections, changes or problems is 6-8 months.  Realistically, it takes more like 9-12 months.

Would you be interested in doing a walk-through of an early stage, multifamily ADU project in San Diego? I'm thinking about doing an open house for my most recent project as a way to network with other investors and real estate professional in San Diego. Is there an appetite for something like that? My project is in 92113 and I was going to provide an overview of the grand vision for the project.

Send me a message with your email if you like the idea and would like an invitation?  I'm planning for a weekend morning in mid-April but don't have a firm date yet.  Let me know if you're interested...

Mark Doty

DotyCapitalGroup.com

@Joseph Coleman I formed relationships with two of the Hard Money guys that I'd seen at the REIA meetings and asked around about them. Each had good reputations and similar rates. I've used both of them because they have reputations that they will perform.

Investment Info:

Single-family residence other investment in National City.

Purchase price: $330,000
Cash invested: $170,000

Project #2 in our "Shovel-Ready" ADU Concept. We purchased a run-down SFR with the goal of re-zoning to large multifamily, then getting approval from the City to build 14 condos on the site. After the approval and likely 8 months we will be selling to another builder who will take the project to the finish line.

I created a YouTube video on the concept and SB9 in California: https://youtu.be/SLBvRvQtXzs

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

San Diego has new initiatives that waive fees to incentivize the development of ADUs and add housing units in the County. We have a housing shortage and these incentives allow us to help the community and turn a profit at the same time!

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

We purchased from a Wholesale while it was in probate after the owner's death.

How did you finance this deal?

Hard money

How did you add value to the deal?

We're right in the middle of the project but are changing the zone and entitling a future build. We will like do a light rehab on the house so we have an additional exist strategy if the City doesn't approve our plan.

What was the outcome?

We should know in the Summer of 2022!

Investment Info:

Small multi-family (2-4 units) other investment in San Diego.

Purchase price: $450,000
Cash invested: $250,000
Sale price: $731,000

The first of our "Shovel-Ready" ADU Concept. We bought a SFR and got three additional ADUs permitted on the back of the property, then sold to another investor. We were in and out in about 7 months and had roughly $200K in gross profit. It was a great project and proof of concept.

I detailed the project on YouTube in a 5 minute video:
https://youtu.be/WgW0r1Jij_Q

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

It has a similar timeframe as a medium flip but adds way more value. I like adding units in San Diego and the entitlement is a huge part of that process. The house was on a big, flat, multifamily zoned lot, so by right, we could definitely add units.

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

The SFR was purchased from a wholesaler.

How did you finance this deal?

We used a hard money loan and financed the down payment with a HELOC.

How did you add value to the deal?

We barely touched the house....all the value was based on the "Approval" from the development office to entitle the three additional units.

What was the outcome?

We sold the project in about 7 months and made a great spread!

Investment Info:

Small multi-family (2-4 units) other investment in San Diego.

Purchase price: $1,065,000

BRRRRRnB in San Diego! Our first Short Term Rental! We opened up the floor plan, added 1 bedroom and 1 bath to the main house and will be adding another bedroom to the second unit. Our final value add will be to turn the garage into an ADU. After the cash-out refi, all three units should be pouring in cashflow since the three listing are less than a mile from the Pacific Ocean!

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

We knew we could add enough value to execute a BRRRR and pull all of our cash back out. Also, it was an amazing location!

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

Originally this deal was part of a multiple-property package, but we only wanted this one. We put in a moderate offer and stuck with our offer and stayed on the agent. Eventually, they took our offer!

How did you finance this deal?

We used a Hard Money Loan to purchase the property, financed construction on our own, then we'll do a cash-out Refi with a Commercial Lender when all three units are completed.

How did you add value to the deal?

We'll add a bedroom to both units of the duplex, another bath to the main house and turn the garage into a studio.

What was the outcome?

Tons of cash-flow with STRs. If the City of San Diego kills the Air BNB market here, we'll target monthly vacationers, traveling nurses and traveling military personnel.

Lessons learned? Challenges?

This was our first attempt at STR and we didn't realize how easy or how profitable it would be to become a host...WOW!

@Alan Nogier How big is the lot? I would see if you could do another full unit before looking at the Jr. ADU. As @Andrew Aladjadjian commented, the lot size in an RM 1-1 zone will dictate your starting point in deciding additional unit, companion unit, ADU, Jr. ADU, etc.?