All Forum Posts by: Victor Ong

@Alex You

It’s an arduous process where all your exterior material and design have to be scrutinized and approved by the local historical committee. There was an instance that the committee rejected our window carpentry due to craftsmanship. My team has to import them from Mexico from a custom master carpenter.

Another note, make sure you establish a GREAT relationship with whoever sits on that committee. Relationship goes a long way in this arbitrary scenario.

Airbnb is probably your best bet. Also check out Bungalow but they are coliving extended stay. 

rule of the thumb for rentals is 1 full bathroom per room. The privatized bathrooms mitigate the roommate frictions such as... sharing of the toilets, sinks, and shower... you will be amazed at how people arguing over their "territories" in that tiny space. Also, you want to hold renters accountable for their bathrooms. In los angeles city, a room with private bathroom could add up to $100~$200/month more per month if you house hacked. Depending on your finish and city, I would budget in $7000~$12000 per bathroom addition with 2 weeks turn around time (no HOA here).

@Joycelyn Calloway

They usually charges 2% upfront for the loan amount plus fees. Interest rate ranges from 8-12%. The loan to cost: acquisition price plus rehab will be capped around 70%~85% but won’t exceed 75% of the after repaired value.

Granted, you will need to have enough capital for down payment, financing cost and carrying cost to pay for the holding period until exit.

Beware some hard money will start charging you interest before releasing your draw

@Leonard Sanford Jr

My first flip was a 2B/2B 1250SF condo in downtown LA. I lived through the remodeling and it wasn't fun. It was originally a 6 week timeline to complete remodel 2 bathrooms, kitchen update, and new paint/floor/lighting throughout the condo. However, we dragged it on for 10 weeks. The dreaded HOA required further inspections and prep work in the common area.

Things I have learned...

1) Keep an area untouched for daily access (shower/sleeping/toilet) and rotate after one area is finished. Your takeout and delivery bill will be high.

2) Pre-buy all the materials and have them delivered on site. You don’t want to shop at the local home depot every-time your GC needs something.

3) Apply for 0% interest credit card for all your material buy and keep it rolling for 12-18m. For labor, you will have to either pay with your savings or get loan.

4) Pay your contractor by inspection milestone!!!! Very important!! You want to make them accountable for the progress!!

5) Remember to hold 10% of the payment for final inspection. Make sure they sign a lien waiver per your state law

6) Prepare yourself for all the heartache and agony you will be going through. I was living with my girlfriend now wife through that 10 weeks. We agree not to go through this again especially when we have 2 toddlers now.

Enjoy the process, the pain is short term. Once you step into that brand new shower you created, everything else doesnt matter anymore.

@Alecia Bolton thank you for your feedback. It gives me a better understanding and I will definitely explore further.

You probably won't qualify for 4plex. FHA requires "self sustainability" test where 3 out the 4 units' rent has to be cover the debt service. FHA loan amount caps out at 1.427M. Most of the 4plex around the LA beaches are 3.5-4m above.

I think what you are facing is an opportunity cost dilemma. I would suggest using Discounted Cash Flow model to compare: Hold/Refi, Exit/Buy New. Since you are holding for long, I would use 10year vesting and assign a discount rate according to your local market's appreciation rate/yr. After you plugged in all the number, it will tell you which approach is more superior: take the cash today or collect them for the next 10 years.

I would say the easiest way to start is to use FHA 203 to buy a Duplex and add value to it. You can put up just 3.5%~5% to get it started. Granted, the FHA loan amount has to be under 980k combined. Then you could use your on hand capital to build 1-2 additions on the same lot to create more appreciation. Eventually, you will turn your property from cash flow even to cash flow positive. Once stabilized, you cash out refi the remaining equity out. Rinse and repeat until you hit a wall with max loan amount to carry on hand. That's when you start looking at 5+ for commercial MFRs.

Brand new buildings could also be subject to RSO. LA Housing has made it clear since 2015 I believe that all RSO'd lot redeveloped into 2 units or above are subject to permanent RSO even they are built after 1977. 

Also if you have leveraged any of the city ordinance such as TOC to increase your density, your newly developed could also be subject under RSO and ELI/LI rent cap.