Hello BP Community,

I am currently in the process of analyzing a deal in Orcutt, CA, not far from Santa Maria. It seems like an awesome opportunity, but I wanted to get some feedback and insight from some pros.

The property has 3 units on it. The first is a single family house that is 4 beds/3 bath, the second is 2 bed/2bath, and the third is a studio. The total monthly rent for the property would be $4700/mo: Currently $2100 for the main house, the owner lives in the 2 bed unit which would rent for $1500, and the studio is rented out for $1100. The lot is 25,000 SF, so there could be potential development opportunity.

The owner is an old school real estate investor that does everything himself. He is now looking to downsize and take it easy. The exciting part is he is willing to owner finance the property! He is extremely flexible on price and terms. One scenario he said he would do was to sell the property for $650K at 5-6% interest with 20% down. 

This sounds like a great deal to me, but when I started looking into it I discovered that the studio does not have a certificate of occupancy. The construction permits are for a "garage" which is technically unlivable. So isn't that illegal? Also, the property is zoned single family, so wouldn't putting 3 different families on that property be wrong?

This would be my first deal, so I don't want to break the law. Any insight you all can provide would be great!

hello Owen,

Currently working with the county of SB for a project, but our company has done a lot of developments in SB and SLO County. To answer your question yes, it is illegal to have someone living in a “garage”. You can have someone “renting” a granny unit, the difficulty you might have is splitting the lot, in SB County it’s a pain, but doable.  We’d need to look over all the paper work on the house to make sure there are no other hidden things on it. You mentioned he’s a real estate investor, so I’m sure he’s looked into trying to split the lot, because that’s where the money is. Maybe there’s a reason he didn’t split them?

Please let me know if I can help you anymore. I always enjoy meeting other investors in the area. We have a real estate and development company. Small family owned business, although we’ve been around since the 80’s and our family has been in construction much longer than that.

@Owen Schwaegerle   They passed a law to make it easier to get permits for ADUs.  If you want to do it right, you should look to get the right permits.  just call up the city, explain the situation, and ask what you have to do. They'll ask for the address so you might want to just say "the owner doesn't want to divulge that at the moment".  

@Jason Francia   We should chat sometime.  I live in Guadalupe currently. 

@Jose Guevarra feel free to reach out to me.

@Jason Francia and @Jose Guevarra Thanks for the insight, yes I'd love to chat.

If you're interested in multi-units in the SLO area, have you talked to the owners of the triplex for sales in Paso? 

It's listed for $575,000 last I checked and market rent for the units was around $1,350-$1,500 each. I talked to them a couple months ago, but they weren't flexible at the time. The couple have owned real estate in the area for a couple decades, self-manage, and want to sell and retire. At the time they were not interested in self-financing, but the delay in sale may have changed that.