New from SF East Bay, CA looking for ADU/live in flip/travel tips

5 Replies

Hi! I'm new to the Bigger Pockets Forums by way of the Bigger Pockets Money podcast by way of the FI/FIRE movement. I've owned my own business for 6 years and I work from home in my 859sf 2br/1ba San Francisco East Bay home I bought as a foreclosure with an FHA loan. While I love my place, I still owe about $23k in student loans at 1.75% interest and $300k on this mortgage and I'd like to continue to build my wealth. I'm looking for tips in three areas:

1. Building an ADU in El Cerrito, CA. Prefab ADUs come in around $100k but I'm hesitant to take on a lot more debt. What can I get that's between a shed and a tricked out high end one where I'll get a good ROI? Will this increase my property value or should I just think of it as a rental unit/place for me to live while I rent out the main house?

2. Live in flip: I could convert my home from a 2/1 to a 3/2 (there's a stand up basement, unfinished, in my home. How do I begin thinking about whether this would be worth it? Where would I live - it would be tough for me to get another property for under $1M in this area?

3. Travel rewards: Thanks to the FI community, I just earned my first 90k Chase travel rewards and I'm looking for someone knowledgeable to help me find the best way to redeem them for a trip from SFO to Geneva in Feb. 2019. Any suggestions for that and for how soon I need to redeem or to find if there's a travel partner with a good route/mileage bonus I should redeem through?

Thanks so much!

Missy

PS. I also have lived in Spokane, WA and could think about buying a rental or other property there in the long term so if anyone has stats on that as a market that would be great. Thanks again!

@Missy Longshore , First of all, welcome to BP!

I can speak about Spokane and the market here.  Your dollars can go a lot further here than coastal markets.  Depending your goals and resources, if you get the right team on the ground, investing here (especially since you know the area), could be an excellent option.  Let me know if you have any specific questions I can help with.

@Missy Longshore For ADU's and the additional room for the flip, you have to check with the city's zoning requirements. As for building out the ADU, the cost would be dependent on the site conditions. $100k is only for the unit itself, there's additional costs for permits, plans, utilties, foundation, etc.. the list goes on.

Whether the flip is worth pursuing, I don't know the value of your home or the area to provide comps for. You need to be more specific and provide an address so that an assessment can be done. 

Feel free to pm if you need help. 

Hi Missy,

I did convert my 2/1 into 3/2 (addition within envelope in the basement). It was one the best decision we have made. We lived in our house during renovation. I think that if you have a choice of making it into a third bedroom and private bathroom with its own entrance. You could also consider short-term or furnished rental if you so choose, that would give you back the highest return. The reason is that you will likely pay a marginal more for property taxes after you renovate, marginal insurance premium increase, tiny bit more utilities, and that's about it. You have then increased the value of your home (forever) by adding the living square footage and bedroom and bathroom count. And the ability of your home to partially be an investment unit.

If you want to discuss more, please feel free to DM me.

Lynn

@Missy Longshore most people don't realize (check with the planning department for your city) that ADU's can only be rented out if the owner lives at the property (either the owner has to live in the main structure or the ADU and you can rent out the other one). Sure, most people don't follow this. But if you had neighbors that reported it ever that wouldn't be a fun experience (I bring this up as I was under contract on a deal in the Peninsula and ended up walking over this issue).

In regards to a live in flip, finished square footage is valuable in the Bay Area. Again, not sure what city you live in exactly, but let's say it costs $150 per sqft to finish your basement, and properties are selling for $400 per sqft, seems pretty easy to me (although basement sqft is usually a bit less valuable).

I know you know this, but 1.75% is insanely low, so keep that I imagine. For your FHA loan, are you out of your private mortgage insurance? That might be a win there to get rid of that depending on your rate/etc.

Travel rewards - welcome to the fun!

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