All Forum Posts by: Zach L.

I have a duplex in Los Angeles and I am ready to add a two-unit detached ADU to the property. I believe I would need to finance ~$140k if I were to move forward in the near future, and even if I could qualify based on my personal DTI I don't have enough equity to make a meaningful dent by doing a cash out refinance, so that isn't a viable option.

Has anyone had luck with finding a bank or lender that will lend on an ADU project based on the income the ADU will generate? I'm confident the two units could generate at least between $3,000 - $3,600 combined per month, potentially more depending on the unit mix, so I feel even an outrageous interest rate could potentially make sense for the $140k loan.

I appreciate any suggestions!

To my knowledge, 30+ day rentals are allowed in rent-controlled properties, once it dips beneath 30 days the city categorizes it as short-term. Depending on the market rents in an area, the cost/rent ratio on an ADU can actually be pretty attractive. I'm exploring adding one to my duplex, so we'll see!

Quote from @Colleen F.:

I wonder do alot of people turn to STR so they don't have to deal with the California LTR laws and issues when you get a non-payer.. and that decreases the housing supply more. It is a problem but current practices aren't making it better.

The city has already thought of that and won't let you STR rent-controlled property!

Hi @Jian Feng, do you know if your property is subject to LA's Rent Stabilization Ordinance (RSO)? If so, there's currently a moratorium on no-fault evictions (which includes evicting a tenant for the owner/owner's family to move in), which I believe will be in place until 2024.

Cash for keys is a good option, but keep in mind the tenants aren't obligated to accept the offer, and if the current rent they're paying is low enough it might not be worth it to them to accept. 

If you're interested in the subject, a great resource for tenant/landlord laws in the LA area is Dennis Block's website. He has an "Ask Dennis" section on his site where landlords ask questions and he posts the answers, which I always find fascinating to read.

Hey @Brynnen Beierle, congrats on the first deal! I'm always looking to meet new people in the area and chat about real estate, would love to get together sometime. I'm in Mid-City, so not too far from your area.

Also going to plug my favorite meet-up in case you're interested in joining next time, the group is called Hiking and Real Estate Conversations, definitely a great group to join if you like going for a hike with great people who love real estate.

@Bryan La

For us, the first step in screening is the initial phone call and in-person interaction when they tour the property. While people will likely be on their best behavior since they're trying to impress you, you'll still be able to get a feeling for how they'll be as a tenant. One thing I like to do at this stage is ask why they're moving, and listen to what they complain about where they currently live. Of course, some complaints will be justified, others not, but if they readily share complaints about where they currently live, they'll likely find similar issues at your property, and might not be worth the headache.

We then have them fill out a standard application. Once we have a completed application, we verify income (by calling the employer and/or with paystubs), verify previous address history (this will show up on the credit check, we ask about any addresses that show up on the credit check but are not listed on their application), and verify identity by requesting a copy of their photo ID to make sure their info matches the application and screening reports.

Next, we run credit, criminal, and eviction reports. For my personal rentals, I use apartments.com's feature for this since it's relatively cheap (~$30, paid by the tenant) and it is pretty comprehensive.

In my opinion, the credit check is extremely extremely important. You want tenants who care about their financial lives so much that they ensure they have a high score because they'll make sure that all of their bills get paid on time and in full, including the rent.

Feel free to reach out anytime if I can elaborate or further clarify anything!

Hey @Justin Marshall, there are some great meet-up groups in the Los Angeles area. Below are a few that immediately come to mind:

- Hiking and Real Estate Conversations: I love this meet-up and try to go every month. The November meet-up already happened, so there likely will be another one in either December or January. Definitely join this group if you like going for a hike with great people who love real estate. 

- The David Greene Team has been hosting monthly events in the area for a few months. They have one scheduled on December 4th in Santa Monica

- Bill Tan will be presenting on Creative Financing Techniques in the Palm/Culver City area on December 8th. Bill is great and definitely someone you can learn a lot from. One thing I have to say about this specific recurring meet-up (not Bill), I used to go before the pandemic, but it always felt like a sales presentation so I haven't gone in a while and cannot confirm if it's still like that, and I'm sure other people will disagree with me. Regardless, it's free and I'm sure Bill will share amazing information. Bill also hosts the LAREIA and writes a weekly newsletter, definitely worth subscribing to as he also highlights upcoming events. LAREIA's next meetup is virtual and on December 14. Bill's last LAREIA meetup with Mike Cantu was one of my favorites.

Let me know if you plan on attending any of these or any other meet-ups you find, would love to meet and hear what you're working on!

@Greg Schreffler

Congrats on taking the first steps toward starting this journey. Everyone is giving great yet varied answers because there's so much opportunity in real estate. The most important thing is finding a strategy that fires you up and consistently making progress toward your goals. Personally, I like the idea of house hacking, ideally once per year, or as frequently as you're able to qualify for the next house hack. As you acquire more properties, you can experiment with different leasing timeframes (short-term, mid-term, long-term, rent by the room, etc.) Craig Curelop has a great book on the subject of house hacking published by BiggerPockets, definitely check it out. 

However, like others have mentioned, there are so many other great options, like self-storage, mobile home parks, syndications, large multifamily, the list goes on! My advice is to figure out what gets you excited, take meaningful daily action toward that goal, and you'll be amazed at what you'll accomplish over the next ten years. I can't wait to hear about your successes, and we're here for you if there's any way we can help. 

Quote from @Alexandra M.:

Hello,

Are there any exemptions available to owner occupied duplexes in City of Los Angeles? My property is currently listed as covered under RSO. I live in one unit and rent the other. I'm seeing language in AB 1482 which seems to suggest if the duplex is owner occupied and the owner is NOT a real estate investment trust, a corporation or limited liability corp then there's an RSO exemption?? I'm hoping for some clarification. 

Hi Alexandra,

Congrats on the house hack! I had the same question as you a couple years ago, and to my knowledge, there is not an owner-occupied exemption for RSO, so I believe your property is subject to LA's RSO. If you want to 100% confirm, you can reach out to the LA Housing Department and tell them about your situation. The wait times are long, but they're generally helpful (I tried calling just now to see if I could quickly ask but they are closed for Veterans Day).

If you have any questions about managing RSO property, I'm happy to help in any way I can, just let me know!

Quote from @Abdul Lateef:

Hello,

I am starting out of state flipping, and to do that i would like to know how much my renovation would costs and what is needed to be changed. How much should a home inspection cost? and how can i make that inspection report a basis for the scope of work i will have contractors bid on?

Hey Abdul,

Others have given you great answers about the cost (i.e. it depends, but likely around $500ish for an average sized house), so I'll touch on your second question.

When we want to convert a home inspection into a scope of work, we typically go line-by-line through the report(s) and group each thing we want a contractor to bid on by the type of expertise needed. For example, we'll have a plumbing section, an electrical section, structural, cosmetic, etc. That way, we can either give the entire list to a general contractor to give us a proposal, or we can send segments of the list to specialty vendors (like plumbers, electricians, etc.) to have them provide a proposal based on just that section.

Happy to dive into this further, feel free to reach out if you have any questions about this!