All Forum Posts by: Sherrie Wilson

I'm still finalizing my ADU floorplan. So a ways off from posting my mid-term rental online. Just hoping to get some opinions real quick......
I live in a gated Lake community in California...  My neighbor is renting her Jr.attached ADU: 2 bedroom, 1 bathroom, 825sq -furnished- $2500/mo (utilities incl./ current tenant renting for 6mo).

• LOFT
  
  • I have plenty of land for detached ADU /their own yard, driveway & entry with the goal of a 1 bedroom/1 full bathroom downstairs & a bedroom/powder room upstairs <so 1 & 1/4 bath>... ((Basically a "Loft" layout, but enclosing half the upstairs -to be a more private upstairs bedroom with it's own toilet & sink)).... I think the vaulted ceiling is classy and the floor plan looks great <custom design>. I think if I furnish it I should easily get the same $2500 or more. (709sq ft)

• NO LOFT:
  
  • But the cost to build is crazy high... and my GenCont. is wondering if I'd rather just do a single story 1 bedroom/1 bathroom. <not sure rent amount -will have to analyze, but guessing $1500 - $1800 furnished/utilities> (496sq)

I'm so torn.... in your experience do you think a mid-term renter would be happy with the 1 bedroom or should I pop for the 2nd bedroom in the enclosed loft + powder room (+213 sq ft)... for an "extra" building cost of $55,000-$60,000. ((OUCH)).

***I was kinda crunching numbers...if I'm estimating it correctly it will take me over 4.5 to 6.5 years in excess rent to make up the cost of building the private loft.....does that seem worth the extra loft cost?

A quick note or advice would be greatly appreciated... I'm literally at a fork in the road with my architect.

Thank you!

Sherrie W. 

Building an ADU.... cash-out refi ???

• -----Just SOLD a Flip Property in April, long-story short my GC got me busted with the City and had to sink another $44k into the project so broke-even. -sigh.  Ready for something more long-term and steady income.
• ----I do have a 'rental' in Joshua Tree House.... <after 5% cap-ex, vacancy, maintenance, etc... barely making $50/mo> but in it for the long-term equity not income <at this point>.

• ----*Primary*: I just bought 1yr ago, June 2023 rate 6.623% - I have enough land to add an ADU.    Estimated equity is $230,000. 

At first thought DSCR since the ADU will be a mid/long term rental, but those rates are most likely 9-12%. Doubt I want a HELOC because I can't pay it back right away -plus I technically don't qualify.

My original loan just transferred to "Mr.Cooper" mortgage. He did a soft check and said my debt to income would not qualify me for a HELOC... but a cash-out refi with an FHA at 6.5% would be okay with around $100,000 cash-out which would put my debt to income around 56% <yikes, I know>  Since I literally just bought my house hitting the 30yr reset isn't a big deal... especially if rate is micro point lower.  

My mortgage would go up $781 for the next 30years,  the ADU income would more than cover & I hope to pay extra principal to cut my loan time -it's just I was hoping to pay off ADU within 5.5yrs- so that I can collect 'all' ADU income at that point <I'm fixed income & I lose 'some' personal income in 5yrs so trying to plan ahead on how to recoup that>.

My Tax advisor suggested I keep the ADU under my personal funds and not my LLC or Corp.

-Whatcha Think!  Any suggestions I'm missing -or ideas- OR Just go with refi... and that extra $100k is only 6.5%.  (plus, I get $1500 credit in processing fees)? 

Thank you for any insight or guidance....
Sherrie Wilson

Kislay,

I have so many tangled tax questions, but one quick clarification.... many advisors say to have a Wyoming LLC as your holding company own your Fix & Flip LLC (for anonymity) so your name is not on state filing. Which I did. Side Note: I'm in California so I have the Franchise tax to deal with.

1. My new California LLC bought a fix n flip and listing it on the market soon -not sure if it'll sell within next 6weeks though, so probably trickle into 2024. I will be response for the Franchise tax regardless.

2. Wyoming LLC literally only exists as a holding only -not doing business- in fact I didn't even set-up an EIN or bank account. Although, I'm being told I should at least file for an EIN. If I do though wouldn't that trickle back to me being a Californian and tack on another $800 franchise tax -even though it won't claim any income. Online searches say 'yes' since it owns a CA LLC, but one of my advisors said 'no' it's not doing business in CA. So needless to say -I'm confused.

Thank you so much!

-Sherrie Wilson