All Forum Posts by: Max Gradowitz

You can make it work. Cheaper to buy, but easier to damage though. If you have tenants that tend to damage the place, I'd imagine the damage would be worse with manufactured homes.

No. Absolutely do not do this.

1) It's illegal. Contractor work in CA requires a license for any work over $500.

2) More importantly, from a liability standpoint, it's absolutely 100% a bad idea to have an unlicensed contractor doing contractor type of work. Without a license, they are legally your employee, so if they get injured or die and they or their family sues you, you are the liable party. Unlicensed generally means they carry no insurance. Even YOUR homeowner insurance usually won't cover any damage from an unlicensed contractor.

I don't know what you mean by this unlicensed person working under a licensed contractor, but whatever the situation is, do not let an unlicensed person do contractor type of work on your home. I had a potential client once (I did not end up representing) that hired an unlicensed contractor to do a bunch of work on his house and one of those things included trimming an extremely tall palm tree. The guy ended up falling and got tangled up in his climbing gear and couldn't breathe. The homeowner called 911, firemen arrived, but by then the guy had slowly died of suffocation while my client and his young kids watched and could not do anything because he was 30 feet up in the air. Not only was this extremely traumatizing for the homeowner and his kids, but the family of the deceased unlicensed contractor sued the homeowner for millions of dollars. I don't know what the ultimate outcome of that lawsuit was, but don't end up like that homeowner.

Consider the central valley. The Los Angeles area in general is insanely expensive and even though rents are high, they are not high enough to justify a good investment. But just a few hours north there are small cities and rural towns where it is really cheap to buy and rents are high enough to make good cash flow.

This property is in Maine, but what if you back out and end up with a property in another state? What happens when you buy your second property in a different state than your first property? What happens if your partnership goes so well you end up owning 5 different properties in 5 different states? 5 different attorneys on 5 separate retainers?

You reside in California. Even though you might buy out of state properties, you are conducting your business in California. You should team up with an attorney in California.

Depends. I do transactional stuff for people all over California (letter writing, contracts, RE transactions, etc.). But if your issue will likely involve litigation (which, without knowing what your specific HOA issue is, I'm thinking litigation might be a possibility) you will definitely want a local attorney that will be able to appear in court, depositions, and/or settlement conferences if your issue ever gets to that point. I don't have any contacts in SF or else I'd PM them to you, but if I were in your situation I would look through Google and Yelp for someone local that specializes in that area. Avvo is also a good resource for finding local attorneys in specific practices.

You should speak to a lawyer that specializes in real estate transactions about how to structure this. I do this for people often in my practice, and there are a lot of kinks you want to work out regarding any existing mortgage on the property (if there is any), tax issues, and how to frame an agreement regarding split of profits and access to the property in your case.

If you are serious about doing this, you need to speak with your CPA about it first, before paying a lawyer to start doing all the paperwork involved. There are complicated tax issues that all parties involved need to know about, particularly in your case where the home is being sold to a family member at a large discount.

Get connected with a local eviction attorney. You probably won't need them soon, but eventually you will. But during escrow, the most important thing are the rent rolls any sort of profit and loss records the seller has. Ask for all expense records they have. And obviously a copy of all existing lease agreements.

I'm seeing lot of rental property purchases in the San Joaquin Valley, where it is still affordable to buy. Not seeing much flips anymore though.

For commercial rents, you should ask a commercial RE agent/broker. Offer to pay them a flat fee upfront of $200 for a detailed rental market analysis and their opinion on current market rent for your building given the sq ft and location. Should be easy to obtain.

To those screaming about house hacking a 2 million dollar property with a 3.5% down FHA loan, I strongly disagree in this circumstance. First, you would have to have the income to qualify for over $12,000 a month mortgage payments. Even if you have that, low down FHA loans require PMI (and I think taxes) to be added to the mortgage payments, which really adds up a lot on that expensive of a property. Even on a 4 unit property (best scenario in terms of the most amount of units you can get with FHA), to make any profit, you are looking at renting each unit at well over $4k at the very least to make any profit at all (that is not including paying your share of your own unit btw). If the normal market rental value of a single unit is well over $4k a month in your area, then sure, it might make sense. I highly doubt any such scenario exists. And yes, appreciation is a factor in the long term, but in this scenario you'd likely be hemorrhaging a LOT of money each month while banking everything on that appreciation. Not a smart decision in my opinion when you really break down the financials.

I'm not saying house hacking ISN'T a good idea in general, I know people it has worked for in inexpensive markets, but there's a little more to putting that plan into effect and it making good financial sense than merely having a large down payment available.

For comparison, in a small town in central CA, a small house as a rental property that you won't occupy yourself with 20% down loan for $150k will need only $30k down and will have mortgage payments around $700. Then you can rent it out for $1k. With your savings, you could buy three houses like that, totaling a little over $2k a month, bringing in around $3k a month. And appreciation on the overall value for the future.