All Forum Posts by: Peter Vroom

thanks for sharing your story @Tarl Yaber .  Do you use an interior designer? 

@Mario F. such creative solutions work well for almost everyone.  Someone gets a space in LA where rentals are at a premium. You get a little extra to pay the bills. However LA City have some strict laws in place.  You may have heard that this is the land of the Free but the "r" in there was a typo back in the day. It's actually the land of the "fee" :)  Jokes aside you can often get away with things like that even if they're not permitted provided you don't put noses out of joint (with neighbors/tenants etc). However, if you do get an inspection or reported the consequences can be extremely harsh.  From paying extra permit fees to tearing it down to more which I'll talk about below.  

From the city's perspective they have reasons for their restrictions and permits. And truth is if we don't follow these agreed upon requirements (zoning etc) then our city will be more like a 3rd world city than the great place it is.  

Further, I believe that ignorance is bliss and that if the city becomes aware of an illegal something they can then be sued if they don't do something about it.  So they are compelled to take action.

There are people you can talk to in the various departments (planning, building and safety, fire and more).  They can be found at 201 N Figueroa St, Los Angeles, CA 90012.  There are also satellite offices around the city.  

http://cityplanning.lacity.org/

They are quite friendly and helpful. However, I do recommend you ask each question to 3 different staff members as you will often get different and even competing answers depending on their level of experience.  There is a "concierge" desk I believe it's called. This is a good place to start as they have the more experienced staff there and you don't have to have such a defined idea of what you want.

They will look up these tools amongst other things (these tools are awesome btw):

http://zimas.lacity.org/

http://navigatela.lacity.org/navigatela/

There you'll get a load of information from zoning to issues related to the property to details of the property to services in the area, whether it's a landslide zone, hydrants, sewer, RSO, Ellis Act and much more. A gold mine.

Also check out the county sites. You're in LA City in Cypress Park but the County still has some good info.

http://maps.assessor.lacounty.gov/

http://planning.lacounty.gov/gis

http://planning.lacounty.gov/gis/interactive

http://planning.lacounty.gov/znet

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I met a guy who was house/rent hacking. He rented a warehouse and then set it up with a few artists + plus his family.  He was a bit of a hero as the landlord was getting good rent paid every month, the artists had a good cheap space to live and work and he was paying zero rent.  Until one day he fell and the ambulance/fire people came. They took him off to hospital to mend and a little while later an inspector turned up.  There were many issues including some non permitted rooms that had been put in by the previous tenants (a business).  They all had to leave and the landlord had to pay relocation costs ($50k) as they knew it was happening (and believed it was all ok and within the law).

Sorry to hear of your troubles.  I used Azuka Uzoh. He specializes in Landlord/Tenant law.  He is battle hardened and wise but also a good fair man. I recommend him and I'm sure if you give him a call he'll get you started on the best path to a solution. 

@Jeff Greenberg is there a way I can get onto a list where I can hear about these meetups (without having to watch the forums)?

Best

I'm not an expert on the law but have been a part of the development of the short term housing ordinance in LA (from the perspective of someone who shares their home).  It was actually a life saver during some difficult times.

There are people who are against homesharing and they "say" it is illegal, however what I've heard from the city is that it is illegal for landlords to do it and illegal for it to be done in RSOs.  But it's not illegal to do it in your own place (where you live).  I believe that the reason some say it's illegal is that there is a general "nothing is allowed" approach with the municipal code unless it is specifically allowed.  The ordinance that is almost about to be put in place specifically allows it but under certain restrictions which I'll list below.  So basically it's a little gray, if it's your place.  For RSO I strongly recommend you get some solid advice on that.  Even if you're living in it.

One thing the city really don't like and are cracking down on is the larger apartment landlords who one way or another force/trick renters out of their RSO homes and then set up like hotels.  

One argument has been that homesharing is a cause of the housing crisis here in LA.  This is unlikely but the argument is getting a lot of use as it's the strongest argument (if it were true). The other arguments like parties and effect on hotel jobs have not taken hold. The former because parties are a problem regardless of the length of stay and the latter I presume because short term renting simply moves jobs.

And in any case, if we're into real estate for profit we like a bit of a housing shortage don't we?  Correct me if I'm missing something here because I'm not an expert.

It's been interesting to watch democracy in process. Through all of the events I've been to there has been a majority of support for people to be able to rent to who they want to.  However on last viewing the ordinance had a lot of catches in it. In particular they are debating a limit on how many days per year you can do short term rentals.  It was at 180 days last I heard.  They also have a complicated registration process. At one point you had to visit 2 different government departments to register.  They have a couple of other restrictions lined up as well.  

I have heard that an elected official will never go against the will of the people (which is generally to let people rent their space to who they want to) but that the lobbyists earn their money in the fine print. This looks like what has happened here. Yes you can do short term rentals but there are some clauses in there that make it not worthwhile.  Further, their fines are huge. For each day you short term rent over 180 days you get a $5000 fine per day. For each day you advertise but are not registered with the city you pay something like $200 per day.

The reading I've done around removing RSO tenants is that it can be done under a few limited circumstances and there is a corresponding fee to be paid that depends on age, family size??, length of tenancy etc. One is that you can evict one apartment and designate it as your place. Another reason is to convert it to a condo.

Good morning collective brain.  New to BP and currently groking the books and podcasts. 

I want help with some perspective on how this partnership would best work please.  

Say I want to partner with someone to buy a multi for $400k and after all expenses there's $800 pm positive cash flow.  I'm bringing the 20% cash down but no credit rating /external cash flow and they are bringing a credit rating and full time job - ie the loan.  Neither can do it alone.  

What is a fair way to set up the partnership? The split? 

If I could also secure a loan and go alone I would get my $9600 cash pa which is 12% on the $80k I put in.  

However, the partner is bringing $320k via a loan.  

One option would be to have them be like a bank.  Eg they borrow at 4% and receive say 7% giving them a profit of 3% for no money down but a little time for the loan app plus the risk associated with repaying the loan if it goes belly up - though with 20% of my cash down the risk is low for them.  so it's easy money for no effort but some risk. Does that reduce their borrowing capacity for future opportunities? 

Another way I've looked at it is we split the net income after expenses before loan repayment 80/20 and they get 80% and pay the full mortgage out of it.  But then there is saved mortgage insurance because I brought the 20% cash but they are getting the advantage of it.  With this I think I would only get 6.6% return on my $80k. Is that simply a price I have to pay for not having borrowing capacity?  

Can it work if we pay the mortgage 50/50 and then split the profit 50/50? The question is really, would one partner start to feel that is unfair over time? Is it sustainable? 

Again this returns only 6%  

One issue for me is with that cash tied up it can't be used on future opportunities, eg a flip.  

This kind of thing has been done a million times, what are the best ways to approach it please?