All Forum Posts by: Pavan Gupta

@Raghavendra Krishnapuram, did you ever find a solution for this? I'm keenly interested in understanding options myself before I start trying to make my own math real. :)

Who did you all use for these modular/prefab homes? What was the price per sqft to construct these units?

For the sake of others that happen to run into this post, I've found hard money lending options which were, frankly, easy to get, but recklessly expensive. US Bank continues to be willing to lend in this space and would require a complete refinance of the home and closing costs on the order of tens of thousands with rates hovering around 4% to get ADU construction completed or duplex construction underway.

I'm hunting instead for a cheaper way to get this ADU built in a first phase with something pre-fab. And maybe I'd just finance this with cash if the return on that cash exceeded 20%.

Hi!, 

I'm busy investigating prefab options for a 1000 sqft, ideally 3br pre-fab option to throw behind my home in Oakland, CA. The lot in question has a very large and empty backyard, so it'll be easy to carve out 1000 sqft). In general, I've had a hard time finding options in this marketplace, but my real goal is to bring the build of this ADU down to something on the order of $150/sqft -- a budget of around 150k which I will finance out of cash I have sitting. Considering FMR section 8 vouchers ($3042/mo according to FY 2020 HUD numbers which I hope I'm using correctly) that return against my cash invested exceeds my target of 20% y/y. I make the assumption I'll have 6k in costs every year (vacancy risk, maintenance costs, capex, insurance, and taxes) leaving me with roughly 30k in cash returned against my 150k budget or just around 20%.

Unfortunately, I'm in Oakland, CA. So, I'll spend maybe 10k in permits and architects, maybe 40k on utility connections, another maybe 50k on the actual prefab components (if I'm reading the only option I've found in cal precut) and another 50k on finishing and on-demand labor (with me doing things I can do to help keep costs down).

First, please do lay in to me about how foolish this sounds. I live in a vacuum of my own thinking and I've got thick skin -- I'd rather find out now that I'm an idiot than a year layer and way off on my estimates on both cost and ability.

And if you suspect maybe I'm CLOSE on the math, I'd love to understand how I can do this with real sweat equity and my own cash at a reasonable rate out here. Are there better (or alternative) options to a cal precut?

Thanks!!!

Chris, thank you for taking the time to go through some of the various funding scenarios and helping me differentiate between hard money lenders and the normal lending approaches. Supremely valuable information! You are truly a saint. <3
 

I absolutely will! Thanks! What kind of terms were you able to secure and what were you trying to do?  

This is incredibly helpful. If you do convert a single family home with appropriate permits into a duplex, does fannie mae lend to potential buyers of this sort of property?

And do you have any recommendations on how to seek construction lenders in this region? Naturally, we've accrued our 20% of equity in the home to start, but very little beyond that, so we're trying to understand how we deploy cash idled right now to obtain a reasonable loan to move this project along...

 

Whoa, this is incredibly valuable knowledge to have. While I do want to keep a portfolio of homes that will generate income, I do not want to be permanently married to this property. I'd be keen to hear Chris' opinion on how to navigate this.

@Saj S., awesome that you're in oakland, do you have a preferred banking counterpart that assists with these kinds of construction loans?

This is fantastically helpful to read. Have banks like First Republic curtailed some of these loan products while they reset their risk profile? And maybe more broadly, I wonder if there exist a list of banks that would provide construction notes...

Hi!, I'm the happy owner of a single family home in Oakland, CA that may be ready for conversion into a multi-family home (Duplex+ADU) which requires a long list of things to come together, one of which is financing. The work that could take place with this project would add roughly 1200 sqft on top of the first floor as a second unit (the duplex) and another 1000 sqft as a detached, category 2 ADU. With a rough understanding of construction costs in the bay area, it seems like this project could cost as much as 700k and I'm trying to understand what the right method would be to make this dream a reality.

As of now, most of the banks I've contacted simply don't have a construction loan product, but perhaps I shouldn't be talking to BoA and Wells Fargo for this.

Any help would be greatly appreciated!

-P