All Forum Posts by: Michael Adamo

Hi BP Community,

I’m exploring adding one or two ADUs to a property I own in the Miracle Mile area, near 3rd Street and La Brea in Los Angeles. My goal is to understand the current demand and rental potential for ADUs in this part of the city, as well as the costs involved in building. I'm particularly interested in any insights or recent experiences with the following:

1. Rental Demand and Rates: What is the current rental demand for ADUs in this neighborhood? Are 1-bedroom units more popular than studios or 2-bedrooms? Any insights on rental rates for ADUs would be helpful.

2. Actual Cost to Build: For those who have built ADUs in LA, what were the actual costs you encountered? Do you recommend using a general contractor, or would it be more cost-effective to handle it myself with subcontractors?

3. Occupancy and Market Trends: How is the ADU market trending in Miracle Mile and nearby areas? With the new subway line being built nearby, do you think this could boost demand for smaller, ADU-style units?

4. Advice on Layout/Design: For those who have added ADUs, do you recommend standalone units, garage conversions, or a combination of both? My property has a rear detached garage with alley access, so I’m exploring options there.

5. General Tips for ADU Investments in LA: Any advice on maximizing ROI from ADUs or common pitfalls to avoid when building and managing ADUs in LA?

Thanks in advance for any insights you can share. I’m excited to learn from others who have experience in the LA rental market, particularly in this neighborhood.

Hi BiggerPockets Community,

I’m in the early stages of launching a private lending business and would love to get some insights and advice from those who have experience in this field. My goal is to focus on non-QM (Qualified Mortgage) clients and underserved markets.

Here’s what I’m working on:

- Target Market: Primarily focusing on underserved markets with non-QM clients.

- Business Model: Looking to provide flexible financing solutions for individuals and businesses who may not fit traditional lending criteria.

- Regulatory Compliance: Ensuring all legal and regulatory requirements are met for private lending.

Questions for the Community:

1. What are the essential first steps I should take to start this business from scratch?

2. How do I effectively build and manage a team for a private lending operation? What key roles should I prioritize?

3. What are the best strategies for securing funding and investment for a private lending business?

4. Are there any specific compliance or regulatory challenges I should be aware of in California?

5. What technology or tools do you recommend for managing private lending processes and client relationships?

6. How can I effectively market my services to attract non-QM clients and underserved markets?

7. What are some common pitfalls or mistakes to avoid when starting a private lending business?

Any advice, resources, or personal experiences you can share would be greatly appreciated!

Thank you in advance for your help!

Best regards,

Mike

Hey everyone, thanks for all the helpful responses so far. I wanted to respond to a few comments:

 @Alex Otto Thanks for sharing the Terner Center report on SB 9's first year, Alex. Interesting to hear that lot splits are less popular than second units.


@Daniel H. thanks for your insight on the SB9 process. I appreciate your experience and hope that things will move swiftly once approved. I wasn't aware of the rent restrictions, so thank you for the information.

@Rick Albert Thanks for sharing your thoughts and perspective as both a Realtor and an Investor. I appreciate the time you took to provide such a detailed response.

You're right that I am pre-approved for $400K, which doesn't give me a lot of cash to work with. And you're also right that SB9 might not be the best option, especially considering the potential costs and setbacks. The foundation issues are something I'll need to take a closer look at, as well.

I agree that selling the property could be the best option, especially since it doesn't have a mortgage. However, I don't love the idea of giving up so much in taxes. That being said, your point about using the equity to buy more properties and potentially acquiring $5+ million worth of real estate does sound good. At a 5.5% return, that I'm guessing could bring in around $25k a month.

Regarding your suggestion to buy a house with an ADU in the Valley and have my father live in the ADU while I live in the main house, I appreciate the idea but I'd probably want a different property for him and me. We both value our privacy and space, so living in the same property might not be the best fit. Nonetheless, I'm open to exploring other options that could still provide a good return on investment and support my family's needs."


Thanks again for your input and advice, everyone. It's helpful to have a community of experienced professionals to learn from and bounce ideas off of.

@Alex Otto

Thank you for your continued support and advice. I did speak to the city and the representative was very helpful, although the conversation was a bit rushed. He confirmed that SB9 is an option for my property, but also mentioned that it hasn't been too popular since it passed legislation last year. I would love to learn more about why that is the case.

The representative also mentioned that I am not required to have any parking, but could not go into detail about what I can build on the property. Your recommendation of speaking to a few more officials will definitely help clarify things. The representative also confirmed that the property is not eligible for TOC3 as it is not multi-family zoned.

Again, I appreciate all your help and responses. Thank you!

.

Hey @Alex Otto

Thank you for your reply. I appreciate the offer for a consultation with someone at your company for a fee, I will definitely keep that in mind if I decide to go that route. I am planning to get a feasibility study done, and I have an online appointment with the zoning department coming up this week.

Do you have any recommendations or questions I should ask during my appointment with the zoning department to get a better understanding of my property's potential and the zoning regulations? Your expertise and experience in these areas would be invaluable.

I will be sure to keep you updated on my progress, and let you know if I need your help in the future. Thank you again for your time and help.

Michael

Thank you for your advice, @Bob Okenwa I appreciate your perspective on offering what I believe the property is worth and using the list price as a suggestion. I will definitely keep that in mind as I continue my search for properties. I understand that many offers may be rejected, but I am determined to find a deal that works for me and my goals. I will keep searching until I find a number that fits my targets. Thank you again for your guidance and good luck to you as well.

@Alex Otto

Thank you for the detailed information and resources, Alex. The information on the R1R3 zoning and the SB9 option is extremely helpful. I appreciate your time and effort in providing me with this information. I called 311 and was transferred to zoning where I spoke with a representative who mentioned that I am eligible for SB9, AB234, AB2097, but was unsure about SB35. The representative also mentioned that the parcel is Tier 3 TOC. This is all great information, but I still need someone to go in-depth with me and help me understand what I can and can't do, as well as what it looks like on paper. I like reading about it, but also seeing images and examples, like the PDF you included, gives me a better vision. 

Could you provide more information and possibly some examples of projects similar in zoning and lot size that you or others have worked on in the past? It would be helpful to see how the R1R3 zoning and TOC, SB9 program have been implemented in practice. Additionally, with your expertise, what would a developer typically want to do with a property in this situation?

In terms of cost savings, I am curious about ways to save on construction costs beyond just upgrading interior finishes such as higher-end cabinets, flooring, and fixtures. Are there any specific framing types or styles, roofline designs, material brands or other methods such as eco or green friendly or that can be cost-effective without sacrificing the quality of the structure? I would love to explore the option of a rooftop terrace, for example, but I understand that certain codes and regulations may not allow it.

Dear @Jade Miali Everett,

Thank you for introducing yourself and offering your support. I appreciate your experience in managing properties in LA and your willingness to help me with my decision. The idea of a 1099 trade is definitely something I am considering as it could bring instant cash flow. I would love to see some examples of properties you have helped elevate to their highest and best use. If they align with my investment goals, I would be happy to schedule a meeting to discuss further. Thank you for being in my corner

@Bob Okenwa. I did take a look at the 4-plex near Bell Rd. and the 51, but I'm still not quite sure if it's something I'm interested in. The inflated price is a bit of a concern for me. I remember searching for properties in Phoenix around 5 years ago and seeing units like these selling for around $75,000 each, and now they're more than double that price. I'm also worried that rents may start to decrease, which could ultimately impact my mortgage payments and cash flow.

I do think that I prefer the idea of a multi-family unit over a single family with a house in the backyard. The privacy aspect is important to me and I think it would be a better fit for my needs. But I do appreciate you sharing those properties with me, I'll keep looking.

Thanks for your condolences, @Dan H.. You are correct that the property was owner-occupied by my deceased parent and I am currently owner-occupying it. However, I am not sure I understand your comment about the property tax value being around $250,000. Can you please elaborate on that for me?

I have also taken out a home equity line of credit for $400,000, with a small portion of it being used for expenses and the rest intended for investment. The rate is adjustable and currently set at a quarter point .25 above prime, with interest-only payments for 10 years.

Wow, @Alex Otto, thank you so much for all of the detailed information you provided. I really appreciate it! I have a few follow-up questions for you if that's okay.

Regarding the lot dimensions, the property is 50' wide by 130' long and the distance from the rear property line wall to the stucco is around 41'. Can you give me more information on the R3 zoning and what that could mean for my property? I've done some research on SB9 and I'm really interested in the possibility of splitting the lot and building a 4-plex. Can you explain what that process would look like on my specific lot and any potential cost savings during construction

Thank you all for your help and advice,

@Bob Okenwa, @Scott E., and @Nabil Suleiman,

Thank you all so much for taking the time to offer your valuable advice and insights. Your suggestions and strategies have definitely given me a lot to think about and consider.

@Bob Okenwa, I am definitely intrigued by the idea of leveraging the $2,000,000 from the sale of the LA property to acquire multiple properties in better areas and potentially house hack in a multi-unit building. Can you share some examples of properties and areas in Phoenix that you would recommend for this type of strategy? Also, what kind of return can I expect to receive on a $2,000,000 investment?

@Scott E.,You mentioned that the burden of supporting my extended family is all on me and I appreciate your concern, but I want to take on this responsibility. I want to make sure that my family, especially my sister and children, are taken care of.My sister is also very important to me, we both have children and I think with the right people around us and this property, and due diligence we can make something of ourselves. We aren't rich, we just got blessed that our family was smart enough to buy and hold. I want to continue that legacy. My children are my world, and we definitely need some financial support for custody battles and their needs and wants. The ex was just a girlfriend, so I got lucky there.

@Scott E., I appreciate your thoughts on selling the property as-is and the potential tax implications of inherited property. Can you elaborate on the potential risks of holding onto the property and renovating it? Also, what are some good neighborhoods in Scottsdale, Chandler, and Gilbert that you would recommend for investment?

@Nabil Suleiman , Thank you for your input and suggestions. I appreciate the insight you provided about the potential for development on the property. I am definitely considering this option, but I am also weighing other options as well. I have been looking into the possibility of adding an ADU to the property, but I am not sure if that's the best route to go. I've heard from a neighbor that they've been having a hard time leasing their ADU, so I'm not sure if that's a viable option for me. I am also interested in starting a new construction project on the lot, and building a new single-family house and renting it out. I am still doing research and considering all my options, but I am definitely open to the idea of development. I researched on ZIMAS, my property is currently zoned R1R3-RG and falls under Transit Priority Area, Additionally, it has modifications to SF Zones and SF Zone Hillside Area Regulations, It is eligible under SB 9, it is also eligible under AB 2334 and AB 2097. Can you share more information on what are the pros and cons of developing the property compared to selling it? and also maybe costs to build.

Hello all,

As a single father, I am reaching out to the community for some advice on a property that my sister and I recently inherited in Los Angeles, in the 90036 zip code. The lot is 6500sqft, with a 3 bed 2 bath 2000 sqft house built in 1925. It's currently zoned R1-R3 and has a rear detached garage with two exits, one from the driveway and one from a connected 15' alley. It's not in an HPOZ neighborhood but is very close to a new Subway station development. The house has been taken down to the studs and completely remodeled in 2000, including new plumbing and electrical. However, it was recently inspected and the foundation has issues and the roof is in good condition but showing signs of wear and tear. The house itself is charming but could use a repaint. The value is $2,000,000. I checkrd the local market and called a few property management companies, they mentioned that i could rent it out for about $6000 a month. Current Property taxes are $3000 a year. 

My goals and obligations are complex and expensive. I need to provide housing for multiple people, including my disabled family in the San Fernando Valley, and a place for myself to live. I would prefer not to live with family unless it was in a multi-unit building where I could occupy one unit. I need a minimum of 2 bedrooms and would like to stay local. However, I also need a 2 bedroom space in the Phoenix area where my children are living with my ex, and I need a place to spend time with them while I am out there. I am willing to temporarily leave Los Angeles for them, but would also like to live back home.

My goal is to utilize this property to supply housing and create generational wealth for myself and my family. I am self-employed and currently eligible for an FHA loan for around 400k and don't mind house hacking. It's not much in California, but I'm thinking it could be useful for a property in Arizona.

I am interested in hearing strategies and ways to utilize this year's interest rates and strategies going into 2023, as well as what people are doing in Los Angeles and Phoenix with the current market. I am also interested in hearing about other safe cities to invest in other than California and Arizona.

As a shark, I know the value of a good investment, and I am confident that this property has the potential to be a great one. I am open to all suggestions and am willing to put in the work to make this a successful venture.

Thank you in advance for your help and advice.

Best,

Mike