All Forum Posts by: Ricio Montes

@Mohammed Rahman thank you! I appreciating you taking the time to respond. Very good points I will have to consider and do my due diligence. 

@Peter Mckernan thank you for your response! I appreciate you taking the time to provide me with this valuable information! 

Hi everyone,

I'm relatively new to BP and hoping I can get some advice from experienced investors.

For context, I am 34 years old and have a full-time career looking for ways to create passive income. My goal is to create monthly cash flows of 10-20k. I understand RE investing is by no means a get rich quick thing, and that is why I would like to accomplish my goal over the next ~10 years.

Some additional facts: my annual salary is 97k (gross), this allows me to save ~50k+ per year. Additionally, I purchased a home in Southern California in 2011 during the market crash, so I have about ~480k in equity in that investment. Other assets I have are ~200k in an account earning 5% interest, and another 100k in index funds. 

Personally, I came up with the idea that I should build a detached ADU on my current rental property (the property has enough square footage to accommodate this project). The ADU project I have in mind is to build a ~1000k 2 bd/2ba or 3bd/2ba. I am approximately costs could range from ~200k - 260k; and when finished, the ADU could rent for ~2700 - 3000 per month (SoCal/LA County). This investment would take ~1+ yr but it would pass the 1% investment rule. It would certainly provide cash flow, and I believe it would appreciate the property value as well as it is not a garage conversion but an additional detached ADU.

For financing, I could go with a HELOC for this project. After this project is completed, I can use my annual savings from my salary and savings from my rental cash flows to expand on more real estate deals and provide more cash flows. California is really expensive, so I can consider out of state (not sure what market yet).

I understand the project timing is long, but as mentioned above I want to give myself 10-year window to accomplish my goal and if it takes less time than great. 

I'm not sure if my idea is the best way to go, I certainly have limited RE investing experience as i only have one rental where I live so no experience with out of state investing etc.

Would like to invite you all to please comment on any ideas on how I can realize my goal. When I am learning something, I like to consult the experienced so that I can learn as much as I can. I believe in learning from experience and lessons, but I also believe in learning from others and their experiences. I would like to take my time and do my homework and get other thoughts and perspectives.

Apologies for the long post. I really appreciate your time and consideration. 

Cheers!

Ricio 

@Jason Wray thanks for your recommendation! Unfortunately, I need to cover a pool I have on the lot to build over it so think I’ll need architect and engineer. 

Good morning everyone,

Looking to build some ADUs. Could anyone help recommend an engineer & architect that services the Pomona/San Gabriel Valley/Los Angeles area?

Thank you so much in advance!

@Dan H. got it, thanks for bringing this up, it’ll be something to consider for sure.

@Su Pak thank you so much for commenting! This is very helpful to me and provides some reassurance as to the ideas I have with regards to RE. I really appreciate you! 

@Dan H. thanks for bringing up some of these valid points. I will be sure to double check with the city on owner occupancy for ADUs etc as I read online owner occupancy is no longer required but better to double check. Thanks again!

@Kenny Cho thank you for your reply. My rental is in city of Pomona (bordering Claremont and right off the 10 freeway). 

My thoughts are location is ok with the colleges being about 7 miles away (cal poly Pomona and my sac). 

A GC our family knows quoted~200k for the project (which I know can vary). 

About a month or two ago I got approved to purchase a home and I was considering West Covina in San gabriel valley, I would be out of pocket 150k and that is just with 10% down and closing cost , just to inherit a mortgage of 4k plus which probably can’t cash flow and appreciation is not a guarantee.

I’m just thinking if I can spend 50k more (the ~200k) on this project to generate ~2500 from that detached adu and ~1500 from JADU, I think that sounds better. 

I would use a HELOC for the ADUs project. Yesterday, I was thinking it could be a risk but everything is just in case I can't rent out those two additional units (but with the state of everything I'm guessing affordable housing is needed).

The risk is that it takes longer to get my investment/return back. I don’t plan on selling that home. 

Money in bank is not really giving me a return so that alone is lower purchasing power with inflation. So yea I thought the adu may be best but please let me know if there is anything else I may be missing. 

Thank you!!

@AJ Singh noted; will try to do more research on architects and hopefully even find some that specialize in ADUs. Thanks for your help! Hoping this will all come to fruition in near future.