Would you buy three homes on one lot ?

Investor · CA · Member since 2019 · 17 posts · 10 votes

I have the opportunity to purchase THREE 2b/1bth homes that are on one lot in Fresno, CA for a purchase price of 215,000 which comes out to $104 per square foot. All three are currently rented out for a combined total of $2,150 a month so they would bring me $1,000 a month in positive cash flow. I walked through all three homes yesterday and they are livable but will need some tlc over the next few years and are in a lower-end neighborhood which is making me question the whole deal because I have no experience in this space. What would you do? any tips?

The few rentals I have are in the best parts of town and I have no headaches at all but I don't have any experience in a lower-ended neighborhood and don't know if it is the best thing to invest my money in. PLEASE HELP!!!

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

I would be talking to local PM's about the stability of the renter base in that area..

as for price and rent that's good numbers for west coast everything being equal.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Sam Eknoian:
@John Montgomery thank you for your input! The lot is 0.31 acre which is far bigger than average in the area. But I would want to check all the permits as you suggested. Wouldn’t the home inspection tell me those answers or would I have to pull a report from the city?
your lender and appraiser will usually catch if its a non conforming use..
but for you just waltz into the planning department and ask someone at the counter simple.

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Barbie Steele
Real Estate Agent · FRESNO, CA · Member since 2016 · 60 posts · 42 votes
6y
Regarding zoning: New laws in California allow all SFR to add ADUs as long as they meet setback requirements.
Subdividing in the future is highly doubtful, as these (currently) are still classified as SFR on one lot. The new laws specify that the ADUs cannot be sold separately as it is one APN.
A possible strategy would be to purchase a home in a B class neighborhood and either turn the garage into a JADU, and/or build an ADU in the backyard. Knowing you will do this before you purchase will get you deals other investors won't see because they're only running numbers on the property as a SFR, and not two or three units.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Barbie Steele:
Regarding zoning: New laws in California allow all SFR to add ADUs as long as they meet setback requirements.
Subdividing in the future is highly doubtful, as these (currently) are still classified as SFR on one lot. The new laws specify that the ADUs cannot be sold separately as it is one APN.
A possible strategy would be to purchase a home in a B class neighborhood and either turn the garage into a JADU, and/or build an ADU in the backyard. Knowing you will do this before you purchase will get you deals other investors won't see because they're only running numbers on the property as a SFR, and not two or three units.

Even though our west coast states have hammered the rental owner with rent controls ext.. the land use aspect has opened up wide for those with the knowledge and wherewhithal to maximize an existing home with rental in basement and build an ADU, in our town Lake Oswego, you don't even have to pay SDC's if the ADU is used by a family member .. and that's not a small number that's 30k plus savings.

so govmit giviths and takiths away out here on the left coast :)

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John A Murray
Rental Property Investor · Long Beach, CA · Member since 2019 · 145 posts · 49 votes
6y
So are my neighbors in Southern California who rent one or more rooms in their SFR only- no ADU not a JADU-breaking the law?
If not then what’s the point of converting a room(s) into a JADU, other than legitimizing a rental unit?
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Jeff Zimmerman
Real Estate Agent · Fresno, CA · Member since 2014 · 367 posts · 174 votes
6y
@Sam Eknoian what part of town are they in? that may affect my answer to your question. Overall, I don't see an issue, those lots can be really charming rentals, kind of like "bungalow" style units. You usually have a lot of options for upgrading the yards and giving your tenants a resort-like experience which will raise your rents. in lower end areas, depending on how low, they can cause problems if tenants don't have enough separation from each other. that's why i ask where it is.
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Account Closed
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
6y
Originally posted by @Barbie Steele:
Regarding zoning: New laws in California allow all SFR to add ADUs as long as they meet setback requirements.
Subdividing in the future is highly doubtful, as these (currently) are still classified as SFR on one lot. The new laws specify that the ADUs cannot be sold separately as it is one APN.
A possible strategy would be to purchase a home in a B class neighborhood and either turn the garage into a JADU, and/or build an ADU in the backyard. Knowing you will do this before you purchase will get you deals other investors won't see because they're only running numbers on the property as a SFR, and not two or three units.

Right now, the new law only allows the properties to be non owner-occupied for the next 5 years, to 2025. I actually messaged Senator Wieckowski (the writer of the SB 13 bill) asking what happens after the 5 years is up? He hasn't responded ha ha, but the law says that then the local cities/counties can then decide if they want to require them all to be owner-occupied in order to rent the ADU and JADU.
I guess the hope is that the cities/counties will have seen that things go just fine with non owner-occupied, but unless the law gets changed to say this is permanent, I'd hesitate to invest money building ADUs unless I planned on moving in after 5 years. I think this is a real flaw in this bill.
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Barbie Steele
Real Estate Agent · FRESNO, CA · Member since 2016 · 60 posts · 42 votes
6y
@Account Closed I agree that this is a major flaw with the bill. At the end of the five years, it can go one of three ways: they make the non occupancy permanent, they take it away with the exception of those investors who got in the previous 5 years, or they take it away, in which case there will be a lot of homes with ADUs on the market that have been cashflowing like crazy for their investors and have appreciated in value to homeowners because now they can rent out the ADU for some extra money.
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