Single family to multi-unit conversion — San Diego 1st investment

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Single family to multi-unit conversion — San Diego 1st investment

Nathan Vaughan
New to Real Estate · San Diego, CA · Member since 2020 · 10 posts · 1 vote

Hey there!

I live in Logan Heights neighborhood in San Diego. I’ve been a homeowner since 2013. We got a great deal on an big old home on big lot. I’ve been restoring and remodeling it for about 7 years. Didn’t really have a plan for what to do with it long term. My partner and I have decided we didn’t want to stay in the area and we also didn’t want to have roommates.

The house is worth about 2x what we paid for it, there are some cosmetic things that need to be done and a few unfinished projects. We got excited about buy a new place with a bigger budget - around 800-900k.

After thinking through things and talking to some realtor and architect friends, I ultimately decided that I needed to do some more investigating before we made such a big decision.

Thank god we did!! I found out that we could have an extra unit on our lot. We could also have an ADU and potentially a Junior ADU. We've decided to divide the 3600sqft of living space and detached garage and build our the house in to a multi-unit rental. Since that discovery and decision, I've been scrambling to get as much education on the topic as I can. I started with ready rich dad, poor dad. Then million dollar real estate investor. And now bigger pockets rental property investor. Started listening to the podcast as well! All really fantastic reads and hugely helpful!

I feel a little bummed that we missed out on so many other great deals in the area back when we got this house. I do feel very fortunate to be where we’re at now having gained all the skills in carpentry, restoration, and design. Plus the house is fully paid off and we have the cash to do the build out.

My plan is to make the conversion, do it tastefully and not cut corners, get cash flow from this place. Then our next I want to get would be triplex or multi unit. Use the cash flow from the Logan house to repair the new place then rent and start paying down that loan. Then move to another place and repeat! Eventually I would like to have enough cash flow to pay others to do the work of finding deals, upgrading the units, and managing the properties. For now we’ll start with this project and see where it takes us!

I would love it if anyone would suggest any other books or sources of information that might help in this endeavor. Also, if anyone lives in the San Diego area and would be up for a coffee or lunch chat, let me know! I super stocked to get going on this and to learn as much as I can!

Sincerely,

Nate

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Guifre Mora
Lender · San Diego, CA · Member since 2019 · 874 posts · 355 votes
6y

YES I agree  Logan and National City are the next big thing. 

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  • Guifre Mora
    Lender · San Diego, CA · Member since 2019 · 874 posts · 355 votes
    6y
    Originally posted by @Nathan Vaughan:

    Hey there!

    I live in Logan Heights neighborhood in San Diego. I’ve been a homeowner since 2013. We got a great deal on an big old home on big lot. I’ve been restoring and remodeling it for about 7 years. Didn’t really have a plan for what to do with it long term. My partner and I have decided we didn’t want to stay in the area and we also didn’t want to have roommates.

    The house is worth about 2x what we paid for it, there are some cosmetic things that need to be done and a few unfinished projects. We got excited about buy a new place with a bigger budget - around 800-900k.

    After thinking through things and talking to some realtor and architect friends, I ultimately decided that I needed to do some more investigating before we made such a big decision.

    Thank god we did!! I found out that we could have an extra unit on our lot. We could also have an ADU and potentially a Junior ADU. We've decided to divide the 3600sqft of living space and detached garage and build our the house in to a multi-unit rental. Since that discovery and decision, I've been scrambling to get as much education on the topic as I can. I started with ready rich dad, poor dad. Then million dollar real estate investor. And now bigger pockets rental property investor. Started listening to the podcast as well! All really fantastic reads and hugely helpful!

    I feel a little bummed that we missed out on so many other great deals in the area back when we got this house. I do feel very fortunate to be where we’re at now having gained all the skills in carpentry, restoration, and design. Plus the house is fully paid off and we have the cash to do the build out.

    My plan is to make the conversion, do it tastefully and not cut corners, get cash flow from this place. Then our next I want to get would be triplex or multi unit. Use the cash flow from the Logan house to repair the new place then rent and start paying down that loan. Then move to another place and repeat! Eventually I would like to have enough cash flow to pay others to do the work of finding deals, upgrading the units, and managing the properties. For now we’ll start with this project and see where it takes us!

    I would love it if anyone would suggest any other books or sources of information that might help in this endeavor. Also, if anyone lives in the San Diego area and would be up for a coffee or lunch chat, let me know! I super stocked to get going on this and to learn as much as I can!

    Sincerely,

    Nate

    Hi, Nate, I'm in San Diego, there is a great FB group in this topic from SD. "ADU San Diego Area, Dream, Design & Build"

    Let's connect I do the lending side of this business and I have investments in GA and if you want to pick my brain on this topic I'm up for coffee anytime.   

    0Reply
  • Andrew Aladjadjian
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 49 posts · 17 votes
    6y

    @Nathan Vaughan

    Hi and welcome!

    I love your plan and believe you should see it through. As stated the new CA laws regarding ADU's are now investor-friendly. One way to learn more about ADU's is to read through the bill (AB-68) which has now taken effect. I would recommend splitting part of the main dwelling into a JADU (up to 500 sqft. as that is the maximum allowed for JADU), then you can build a new ADU up to 1200 sqft.(this is the largest you can build) or convert an existing detached garage (this would be less costly than a new build but the rental return would be less). If you have an attached garage I would recommend converting that garage into the JADU (JADU has to be a part/attached to the main dwelling.) Every city has its own regulations as well. Speak to the city housing department regarding your plans.

    Hope this helps.

    0Reply
  • Nathan Vaughan
    OP
    New to Real Estate · San Diego, CA · Member since 2020 · 10 posts · 1 vote
    6y

    @Guifre Mora

    Thanks Guifre!

    Just joined that group! I’ll follow up, I would be super interested in hearing how that side of things is going, especially in San Diego right now! It’s amazing how relatively quick things are moving. Only 15 years ago North Park was an area to be avoided. 10 years same thing for Logan Heights.

    I feel like a lot of developers are kind of getting ready to build in Logan or already doing so. Especially considering where the markets are, and the opportunity zone incentives. Seems good on all fronts to be building and rehabbing in Logan and national city.

    Talk soon,

    Nate

    0Reply
  • Guifre Mora
    Lender · San Diego, CA · Member since 2019 · 874 posts · 355 votes
    6y

    YES I agree  Logan and National City are the next big thing. 

    1Reply
  • Nathan Vaughan
    OP
    New to Real Estate · San Diego, CA · Member since 2020 · 10 posts · 1 vote
    6y

    @Andrew Aladjadjian

    No post

    @Andrew Aladjadjian

    @Andrew Aladjadjian

    Thanks Andrew!

    It definitely make a lot of sense to go the ADU route versus a full new units. Rents are so high right now, and housing supply so low, seems the legislation reflects California's desperate need for more housing.

    A neighbor of mine who’s also an architect developed a pretty interesting concept that we may incorporate in to our build out. We would essentially create self sufficient units within the primary residence. We still have doors between units so it would count as 1 unit. I’m an audio engineer and a builder, so building a sound proof door wouldn’t be a problem. That way instead of renting out the primary residence as a 5bed/2bath, we rent out 4-5 400-800sqft interconnected units each with their own bathroom, kitchen and bedroom. The largest one with a real kitchen and the others with smaller kitchenettes.

    1Reply
  • Robert Comstock
    Member since 2018 · 138 posts · 56 votes
    6y

    Logan heights gentrification is a hard sell in my mind...its improved from what it was but let's be honest it was a low bar.  

    0Reply
  • Nathan Vaughan
    OP
    New to Real Estate · San Diego, CA · Member since 2020 · 10 posts · 1 vote
    6y

    @Robert Comstock

    Hard to say how things will develop. I’d say that over the past 7 years living here I’ve definitely noticed some big changes. There’s a 150 million dollar project to rehab memorial prep school. And we sit in both a promise zone and opportunity zone. It’s also super close to downtown, the naval yards, and Coronado. It’s in a transit corridor so no need to add parking for ADUs. That said, I still wouldn’t buy anything I’m this area right now unless it was a killer deal. That’s the part I don’t know how to find!!

    Nate

    0Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Nathan Vaughan:

    @Andrew Aladjadjian

    No post

    @Andrew Aladjadjian

    @Andrew Aladjadjian

    Thanks Andrew!

    It definitely make a lot of sense to go the ADU route versus a full new units. Rents are so high right now, and housing supply so low, seems the legislation reflects California's desperate need for more housing.

    A neighbor of mine who’s also an architect developed a pretty interesting concept that we may incorporate in to our build out. We would essentially create self sufficient units within the primary residence. We still have doors between units so it would count as 1 unit. I’m an audio engineer and a builder, so building a sound proof door wouldn’t be a problem. That way instead of renting out the primary residence as a 5bed/2bath, we rent out 4-5 400-800sqft interconnected units each with their own bathroom, kitchen and bedroom. The largest one with a real kitchen and the others with smaller kitchenettes.

    You won't be able to permit those additional kitchens - as soon as you propose adding what looks like a kitchen facility, you'll get denied by the City. Excepting the ADU, JADU, and wet bar rules.

    0Reply
  • Nathan Vaughan
    OP
    New to Real Estate · San Diego, CA · Member since 2020 · 10 posts · 1 vote
    6y

    @Justin R.

    That’s true, and certainly something to consider.

    We’re interested in playing with what the planning department considers a ‘unit’. For example, we could create 4-5 units on the ground floor around a central communal kitchen. Each 350-500sqft unit could be self sufficient with its own entrance, bathroom and small kitchenette but still have access to a shared common kitchen. The architect Ted Smith pioneered this idea in the 80s and 90s and has a few buildings using this model around San Diego.

    The adu and jadu would be built to code and independent. We wanna max our the lot but make sure that it’s enjoyable to live in. Everything kinda hinges on how much it will cost, how much it will rent, and how easy it will be to keep rented and maintain.

    0Reply
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