All Forum Posts by: Kevin Fox

Thanks for the recommendation Dan!

I would be more than happy to show you some properties while you’re in town. Feel free to reach out and we can connect. 

Hey @Marc Cass

@Dan H. definitely nailed it on the head. Beat me to the punch on about 70% of what I was going to say (as he tends to do here haha). 

To reiterate, though, I definitely agree with him that you should NOT pay full (or even close to full) price to an agent with a buyer already identified. 

I think the right RE agent can provide a ton of value beyond just securing the buyer(especially if you plan to reinvest those funds), but 95% of the cost an agent will incur to sell the property happens in that phase. If you can save me that time/money, I’d have to be an egotistical maniac to not want to pass those savings on to you as my client.

Dans recommendation to reinvest those funds with increased leverage in to a small multi-unit property is equally as insightful. In my opinion, the investment potentials of single and multi unit properties are not even in the same universe here in SD. 

If you’re interested in seeing what trading up your existing property for a multi will look like for you financially, I’d be more than happy to walk you through a few different scenarios and show you what the numbers look like. 

I’ll shoot you a PM now so we can chat in greater detail!

Kevin

Hey Alissa,

You are very wise for considering an ADU strategy here in SD. With the new regulations, I think there is a TON of opportunity out there for you.

Your question is one that a lot of newer investors struggle with. 

I think the best way to answer that question is this:

First, before doing any serious number crunch or analysis on the development, I would ask whether or not the submarket is likely to be favorable for an ADU strategy.

Whenever the existing inventory of the submarket lacks anything similar to the project I’m considering, the first thing I ask myself is - Why?

For something like this, the answer could very well be that the old regulations made it unfeasible and have nothing to do with the neighborhood’s likelihood of adopting to the increased density/higher sqft properties. However, you want to make sure that is, in fact, the case and not the other way around. 

While there are a ton of neighborhoods in San Diego that play VERY favorably for ADU additions, there are others that the strategy is not well suited for.

With that warning in mind, there are several ways to evaluate ADU deals in areas with scarce comparable sales.

The first thing I’d do to get an indication of value is look to the 2-4 unit market, with duplexes obviously being the best basis for comparison. 

Second, I would look to derive value from comps that are similar to just the main home. That would serve as the “base.”

Then, I would look at the income potential of the ADU in that neighborhood and reverse engineer it's value based on the market cap/other factors and add it to the base.

It’s definitely a tricky process that takes quite a bit of experience to master, but it is absolutely doable.

If you’d like any help with your evaluations, please feel free to reach out. My team and I are well versed in the space and would be more than happy to assist.

Best of luck!

Kevin

My pleasure, Milad. I can certainly understand your reasoning for going about the process in that order.

As for your question- I will have to revert back to the answer I gave in my last response. Even within San Diego, each particular neighborhood will be different from most others. 

For instance, in a neighborhood like National City, affordability of materials and maximizing living space within the unit will be key. Curb appeal and making the home seem less like a manufactured home will primarily be secondary concerns. 

In a neighborhood like North Park, however, focusing on aesthetics/trendiness and minimizing the “cheap” feeling commonly associated with manufactured homes will be critical to your success.

With that in mind, I would think this strategy would be better suited for more blue collar neighborhoods/markets where housing affordability is paramount to renters’ decisions, but I don’t know enough about the quality/price of available manufactured units to say that definitively.

Hey @Milad Aria

This is definitely an interesting topic that I’ve seen kicked around on the forums a handful of times over the years.

From what I can remember, I know several (likely the majority) of those considering the strategy ran in to obstacles they viewed as insurmountable/unworthy of the time/effort/money required.

That said, I do recall a few that found a way to make it feasible/profitable and your experience with imports/manufacturing likely gives you a leg up on your average investor.

I’d be very interested in seeing your  plan/number crunch if you’re confident in your ability to make it work. 

In regard to the most desirable/in demand type/model/finishes - as is the case with just about everything in REI, that will greatly depend on the sub-market in which you're looking to do this.

I know you said California, but are there any particular regions/cities/neighborhoods you’re considering? 

That's even more awesome if your network extends down to SD! 

I know that I'm not telling you anything you didn't already know, just emphasizing the ways SD seems to nail all of your criteria on the head.

I'll shoot you a PM now so we can arrange a time to chat!

Just calling it as I see it my friend.

If you’ve always wanted to live here, why not call it your first home?

You mentioned LA being a location of interest due to the amount of work in your industry and your network of tenants - San Diego has an exponentially growing festival scene, is within hours from just about every major festival on this side of the Country, and has such a strong rental market that you’d be silly to rely on a network to fill vacancies.

The choice is yours 😉

Sounds great!

If historical returns consistently in the top 5 nationally, low vacancy, and quality tenants isn’t enough to sway you to SD on the investment side - I would think that perfect weather year round, a fantastic job market, and the LA lifestyle without the LA attitudes should do it on the personal side.

Looking forward to hearing from you soon! 

Hey @Daniel Gengaro

I’d be more than happy to assist with a house-hack in San Diego. Feel free to reach out if you’d like to chat!

Hey @Corben Briggs

Great question.

The short answer: You are both right.

The longer answer:

You are right in thinking that the sooner you can begin generating rental income, the better.

Your girlfriend is right in the sense that buying locally will almost always make the most sense for your first deal. 

There are several reasons for this, but I think the biggest is how far your money can stretch with the down payment requirement for each.

Your motivation for wanting to invest out of state is the lower prices, which I certainly can’t blame you for, but here is the issue with that:

Say you’re looking at purchasing an OOS property for $170k. Since you will not be occupying the property, you will likely be required to put 20% down, which equates to $34k.

Now, alternatively, what if you are looking at deploying that same $34k in an owner occupied deal? That 20% down payment requirement drops to between 3.5-5%, which equates to $680k-$970k in purchasing power.

So, what does this mean in regard to your strategy?

That is ultimately up to you two to decide, but what I STRONGLY recommend is considering the purchase of a 2-4 unit property locally (which have the same 3.5-5% down payment requirements!) with strong value add potential.

By going this route, you accomplish virtually everything that BOTH you and your girlfriend are looking to accomplish, without giving up much of anything. 

She wants to stop paying someone else’s mortgage, lower your cost of living, and create value via forced appreciation. Check. Check. And check.

You want to lower your cost of entry, begin growing a rental portfolio, and receive rent payments which will help secure your financial future. Check. Check. And check.

To me, the answer is pretty simple from a financial and feasibility standpoint (not to mention the avoiding having to sleep on the couch because you didn’t listen to your girlfriend standpoint😂).

If you're interested in learning more about the strategy or would like help deploying it, just shoot me a message. My team and I help investors with these kind of deals all over SD county and would be more than happy to assist you guys as well!