All Forum Posts by: David R.

Was just wondering if anyone else was having trouble re-upping their legacy Pro membership. 

Legacy Pro membership was payed for today but the membership did not re-activate. Shows inactive. Any input would be great. Thanks. 

Dave

Hello everyone. Looking for a little guidance on my property in Los Angeles.

My long time CPA has passed away and we are looking for some guidance. 

We finished construction of 3 additional units on a property with a duplex zoned for 5 units. 

The 5 units were fully rented and performing as of November of 2021. The additional 3 units cost $600k 

and took approximately 2 years to complete. 

My question (we are newer investors) pertains to tax implications and depreciation. 

We have owned the property since 2016 and ran it the first five years as a duplex. 

I am curious as to how the amount spent adding the additional units ($600k) will affect our 2021

income tax return.

I have read a bit about cost segregation and was wondering if that might be an 

advantageous path for us. We do not plan on selling the property as we feel it is a keeper

long term. Thank you in advance for any thoughts and/or referrals. I do appreciate it. 

Thank you Dmitriy! Appreciate that. 

Scott, 

That looks great! We have something in mind for the front of the building once the driveway is complete. Thanks for the idea!

Hi Jon. Sorry for the super late reply. Our units are located in the Lincoln Heights area of Los Angeles. Yes, we made an initial investment of $80k to renovate the front two units for a total investment of $455k. Since that renovation we have invested an additional $600k in the development of 3 more units at the back of the property. One 3/2 and two 2/1's. 

Large multi-family (5+ units) commercial investment investment in Los Angeles.

Purchase price: $375,000
Cash invested: $455,000

My wife and I purchased a tired 2/1 duplex with a bigger lot 8500 sq ft. Zoned RD 1.5 for 5 units. Complete rehab of the duplex and now currently in the process of finishing up the addition of 3 units to the backside of the property.

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

The duplex was in need of a complete rehab. The price was great for the area and the property is zoned for 5 units. The property is located in a up and coming area and close to local transit/freeway access.

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

On market deal that we were quick to pull the trigger with the highest cash offer.

How did you finance this deal?

Cash

How did you add value to the deal?

This property was distressed and in need of a complete makeover to bring to market rents. We completely remodeled the duplex to the studs, added central HVAC (forced heat and window units previously). This initial part of the deal was amazing, but with the zoning allowing 3 additional units we decided once the front units were completed to move on the 3 additional units in the rear of the property. One 3/2 and two 2/1 units.

What was the outcome?

The results for the duplex were as good as I had hoped numbers wise. We have tenants in both sides of the duplex. For our first rehab deal, it really motivated us to look further in to developing the rest of the property given the acquisition costs of an additional property in the Los Angeles area. We are literally one month (fingers crossed) from bringing the 3 back units on line.

Lessons learned? Challenges?

Learned a LOT about what goes in to turning a property around and taking it to the next level.
Challenges include timelines of inspections, pulling permits and the time crunch especially with the current Covid-19 challenge.

@Sarah R. I purchased/remodeled a vacant duplex in Boyle Heights in 2016. Once it came time for the re-finance we had the same experience as you with the comps in the neighborhood. This concerned me with future values based on where we were in the market cycle. Once it came time to add on to the property, I chose to go with 3 additional units to get in to the commercial space. We are just finishing up the final three units, so hopefully the decision to go with 5 versus 4 units will bear fruit with future appraisals.