Moving to Ventura - Thinking of house hacking suggestions rec

New Member Introductions
5yFollow

Moving to Ventura - Thinking of house hacking suggestions rec

Erik TsouPro Member
New to Real Estate · Los Angeles · Member since 2019 · 19 posts · 4 votes

Hi everyone, I've decided to move to Ventura CA in June. I've started my search for houses and I really want to house hack. So thus far there are couple of options that I am considering.

1) Find a house with big lot and build an ADU
- Difficult as I will be building something from ground up.
  - I don't know enough about this process so it is quite daunting
- Big Upfront cost
- Time intensive
- The ADU built would be brand new and most likely will provide good rent and increase the value of the property.   

2) Buy a duplex and fix it up. 
- Low inventory
- Non-permitted builds
- Inheriting tenants? (So far the ones I found all have tenants and it seems like not a lot is willing to deliver property vancant)
- remodeling would most likely be the cheapest.

3) Junior ADU
- Have to get creative, find floor plan that works to convert current living space to 2

4) roomates
- Least desirable to me


What have people been doing for house-hack that have been successful? 

I currently have 2 properties in mind. One is a property that has a large lot. The property itself is old and need some TLC. The location is great for me because it is close to where I will be working in Ventura, and I can take the time to build the ADU as a project. The second property I found is the same distance to work. It is a triplex with one unit non-permitted. the property is more expensive than the first and has tenants. The property has also been on the market for a while, was in escrow a couple times but fell through...I think its because of inspection issues but unfortunately I can't get a hold of the inspection report. Now the preferable way to approach this is to offer below asking and have units been delivered vacant. If that is the case, I think Property #2 will be very good since I'll probably spend 1-2 months getting problems fixed and will be able to rent out the units. (heck...I can live in the unpermitted one).


Well, any input is appreciated. 

0Reply
27 views

5 Replies

Jump to latestLatest
  • Tony Clark
    Real Estate Agent · Ventura, CA · Member since 2020 · 340 posts · 166 votes
    5y

    @Erik Tsou best of luck with the project! I just moved out of Ventura County (Thousand Oaks), and I know at least where I was the city was very welcoming of ADUs and had passed an ordinance a couple years back that allowed many single family residences to have an ADU/DADU. Might be the same with Ventura. Building an ADU is definitely costly up front, but my guess is anything that you build would provide an incredible ROI based on current market rents vs. construction costs. You might be able to either house hack a large house by living in the ADU or setting the ADU up as a short term rental. I'm currently house hacking a short term rental where I live in Nashville and the numbers are much better than they would be with a long term renter.

    Anyways, I wish I could add more practical value but I hope this serves as encouragement! That's a great idea and Ventura is a beautiful area!

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y

    >The ADU built would be brand new and most likely will provide good rent and increase the value of the property.

    The value added is virtually always (alway?) less than the hands off costs of adding the ADU. This implies that hands off ADU additions start with a negative position. The initial cash flow goes to recover the negative position. The negative position can consume years of cash flow.

    My best advice is before proceeding this route, understand how the ADU will be valued in your market. If the ADU results in a negative position, there is no easy method to extract out the investment potentially trapping the investment for years (until appreciation and equity pay down result in a value 33% higher than costs (using 75% LTV refi)).

    In most markets a better value is to purchase a property with an existing ADU. Someone else has paid the cost of the ADU, someone else has spent the effort associated with ADU construction (even hands off addition takes effort), and buying an existing get home purchase (conventional Fannie/Freddie) financing.

    >Junior ADU

    Due to the owner occupancy requirement of JADUs, the JADU can reduce your exit strategies.  You cannot exit to make the JADU a non-owner occupied rental.  That implies with current rules you would need to sell or leave the JADU vacant.   When selling, non-owner occupied RE investors will be unlikely to be interested in purchasing because most will not want an empty unit   

    Whatever option you choose, do the research for your market.  

    Good luck


    1Reply
  • Erik TsouPro Member
    OP
    New to Real Estate · Los Angeles · Member since 2019 · 19 posts · 4 votes
    5y
    Originally posted by @Dan H.:

    >The ADU built would be brand new and most likely will provide good rent and increase the value of the property.

    The value added is virtually always (alway?) less than the hands off costs of adding the ADU. This implies that hands off ADU additions start with a negative position. The initial cash flow goes to recover the negative position. The negative position can consume years of cash flow.

    My best advice is before proceeding this route, understand how the ADU will be valued in your market. If the ADU results in a negative position, there is no easy method to extract out the investment potentially trapping the investment for years (until appreciation and equity pay down result in a value 33% higher than costs (using 75% LTV refi)).

    In most markets a better value is to purchase a property with an existing ADU. Someone else has paid the cost of the ADU, someone else has spent the effort associated with ADU construction (even hands off addition takes effort), and buying an existing get home purchase (conventional Fannie/Freddie) financing.

    Thanks! This is helpful. I think a JADU would not be in my consideration now. I am deciding between building a SFH with large lot vs Duplex/SFH with existing ADU.

    Your point about money trapped investment is well taken and is swinging me towards finding a property with existing ADU. There are other factors also in play since I also want the location of property to be close to work (I understand this is a quality of life thing, but it is worth something to me.) I'm actually going to go see the two properties I found above this weekend, and may proceed with one of them. If it doesn't go through, then I guess now it will depend on the inventory of the market. I have already a pre-approval, just waiting for a property that comes up that fits the bill.

    0Reply
  • Erik TsouPro Member
    OP
    New to Real Estate · Los Angeles · Member since 2019 · 19 posts · 4 votes
    5y

    It seems like market is red hot everywhere. After combing through various properties in Ventura, found a property that checked all the boxes, made an offer above asking by 75k! Got beat out by cash buyer. Oh well. Continuing the search.

    1Reply
  • Erik TsouPro Member
    OP
    New to Real Estate · Los Angeles · Member since 2019 · 19 posts · 4 votes
    5y

    Just to provide an update to this thread if anyone is interested, I've since then purchased a property in Oxnard that I plan to house hack. It is a 3 bedroom and 2 bath single family home with attached garage. The cool thing about this property is that there is front and back portion of the house. The front portion has 3 bedroom/1bath with nice size dining room and living room. The back portion of the house has a kitchenette, bathroom and a living space. There is also a back alley entrance with carport at the back of the house. My plan is to make this a functional duplex by separating the front and back portion of the house. (Just have to put a wall over where the door was. I'm in the planning stages now. Inspection is clean and now just waiting for appraisal and loan approval.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free