Fix / Flip - Hollywood Hills Mansion

OP

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

7y

@Nabil Suleiman Thanks for the info and nice to meet you!

It looks like I can rent a property short-term if it's considered my primary residence. All the more reason the syndicate should allow me to live there full time..

Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

7y

@Ian Dunross I've got two baby Gators in Gainesville right now and 2 more on the way. I spose if you've got to leave the swamp LA is an OK move ;)

There's so many options for you. [Solicitation Removed by Moderators]

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Hector Martinez

Real Estate Agent · Las Vegas, NV · Member since 2017 · 10 posts · 6 votes

7y

Hi Ian, I have been reading that sales in the LA area have slowed quite a bit over the last several months. Prices haven’t yet followed, but that would make me really wary when playing with a multi million dollar property. Have you considered pursuing a similar strategy on a smaller scale?

Also, I know you said multi-plexes aren’t necessarily good for income on traditional month-to-month basis. Would the numbers work if you bought a four plex, having you live in one unit, and maintaining the property as your primary, and offering the other three units on air bnb? Offering one or two of the units on a room rent basis and offering the other unit(s) as a whole unit could help the numbers work.

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Nabil SuleimanBusiness Member

Real Estate Agent · Los Angeles, CA · Member since 2016 · 596 posts · 299 votes

7y

@Ian Dunross true, I also don’t know if the battle with air bnb is over. So as long as you have multiple routes of producing income then you can leverage your risks. Do you have anyone that aligns with your mindset that would syndicate

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Jeff C.

Real Estate Broker · Bakersfield, CA · Member since 2018 · 269 posts · 597 votes

7y

Originally posted by @Ian Dunross:

Hello everyone,

I own a couple of small multi-family buildings in Florida, though I live in Los Angeles where I make a couple hundred thousand dollars a year in the entertainment industry. I mention my income to show it's high enough to actually consider buying a "starter" home for myself here in LA before I come to my senses and start eyeballing more quads in Florida..

During a misadventure in Las Vegas this week I realized I don't want to be stuck on another LA - Ft. Lauderdale flight to look for more Real Estate. I've spent 12 years in the belly of the beast (Los Angeles) and haven't attended one Real Estate meet-up or met any other investors. Not good!

It's time I realize that LA is my home and I should spend at least 100 hours networking and looking for Real Estate investments before I consider buying another property in Florida or another long distance market.

I did a lot of thinking on the LA market and here's what I came up with..

Buying a multi-family property here is ill-advised for many reasons. Nonexistent cash-flow, rent control, sky high prices to name a few. I came up with an idea which I want to furnish to the Bigger Pockets community for their thoughts..

Get a syndicate together to purchase a mansion in the Hollywood Hills, that needs light-moderate rehab. While rehabbing, the syndicate rents the mansion on AirBNB in addition to renting the home for video shoots, Instagram photo shoots, parties etc..

After the rehab is completed, the house can go back on the market as an exit strategy. Of course I'd live in the mansion to manage the rehab and the property. If someone rents it on AirBNB I can make myself scarce.

If we (the syndicate) picks up the place for 3mil and rents it for $1,000/night on AirBNB (or less for half-day photo shoots etc..) we might be able to make these numbers work!

Your thoughts are appreciated!

I can't imagine trying to rent out a property WHILE it's being rehabbed. Sounds nuts. There will be workers all over the place, noise, dust and debris.. I can't imagine any renter enduring that. Would you just tell your crews to go home if the place happens to get rented? If they go start another job, they probably won't be available to get back on yours when your short term renter leaves. It just sounds like a mess all around.

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OP

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

7y

@Dave Foster HA yes! We should definitely link up. I was back in Gainesville twice this year looking at property and watching Dan Mullen return us to our former glory!

OP

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

7y

@Jeff C. I was thinking we could do it room by room (making the room off limits to Air BNB guests) and work each day that the place isn't rented. Naturally this would extend and complicate the rehab process. If we had to rehab the common areas and pool area we'd have to limit the rentals to night time video shoots, photo shoots etc.. after the construction crew left for the day..

OP

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

7y

Originally posted by @Nabil Suleiman:

@Ian Dunross true, I also don’t know if the battle with air bnb is over. So as long as you have multiple routes of producing income then you can leverage your risks. Do you have anyone that aligns with your mindset that would syndicate

I know a couple of people through the entertainment business that can throw a lil cash into a syndicate. I'd rather have a small number of people throwing bigger amounts of money so there's less people to deal with..

I'm planning to only syndicate a down payment and get a jumbo or commercial mortgage to cover the rest. I think the biggest headache will be finding a loan, even with a 25% down payment!

Nick Hedberg

Real Estate Agent · Venice, CA · Member since 2015 · 182 posts · 125 votes

7y

@Ian Dunross - I think your idea has merit and like @Jeff C. and @Hector Martinez mentioned you will have some obstacles.

I have a flip hitting the market in Hollywood Hills in June and the market is definitely slowing. Homes are taking longer to sell you you need to be conservative with your ARV.

Also renting the place while rehabbing will obviously be a major challenge, but if you have a good contractor you can certainly working around this by moving in phases and blacking our certain timeframes.

There are tons of people that Airbnb and rent out there homes for shoots so there is definitely money to be made. You just need to know your numbers and be aggressive.

In Hollywood there are plenty of homes sitting on the market for a long period so send out some low balls. We landed our flip for $2.15m and it was orginally listed for $2.65m. Write some offers and see what sticks.

OP

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

7y

Originally posted by @Hector Martinez:

Hi Ian, I have been reading that sales in the LA area have slowed quite a bit over the last several months. Prices haven’t yet followed, but that would make me really wary when playing with a multi million dollar property. Have you considered pursuing a similar strategy on a smaller scale?

Also, I know you said multi-plexes aren’t necessarily good for income on traditional month-to-month basis. Would the numbers work if you bought a four plex, having you live in one unit, and maintaining the property as your primary, and offering the other three units on air bnb? Offering one or two of the units on a room rent basis and offering the other unit(s) as a whole unit could help the numbers work.

Hey Hector nice to meet you! I know what you're saying...but the thought of paying $1,000,000+ for a four-plex next door to an Auto Zone doesn't get my investment juices flowing. I always try to run numbers for something like this but I always get disinterested :/

Jeff C.

Real Estate Broker · Bakersfield, CA · Member since 2018 · 269 posts · 597 votes

7y

Originally posted by @Ian Dunross:

@Jeff C. I was thinking we could do it room by room (making the room off limits to Air BNB guests) and work each day that the place isn't rented. Naturally this would extend and complicate the rehab process. If we had to rehab the common areas and pool area we'd have to limit the rentals to night time video shoots, photo shoots etc.. after the construction crew left for the day..

A lot of things can't quite be done room by room. You can't just start flooring in a bunch of different rooms, come out into the hall and see where things meet up. Its also really inefficient. When your guys are painting.. lets just say ceilings for example, they need to be spraying the whole house. Not setting up and tearing down again room by room... and who wants workers coming in and out of a place they're renting? A lot of the construction process is loud (ever air chisel out a house full of old tile flooring?). A lot of the construction process is stinky (some of the lacquers and epoxies we use stink to high heaven). At times the water will have to be off. At times the power will have to be out. Trust me, just clear the place out, get as many guys in there as you can, and knock out the project.

Thomas M.

Investor · Los Angeles, CA · Member since 2012 · 54 posts · 19 votes

7y

I think this idea is not feasible.

I rent out a 5BR place in Hollywood on ABB and I can tell you it sucks. The guests are very difficult. They expect the world and they freak out if any little thing is wrong. It's a ton of work doing ABB in a large Hollywood house. As for the instagram photoshoot idea, I just don't see where you would find a lot of paying customers. LA is full of free locations that you can use for photoshoots.

Throw in a rehab and you are completely screwed on ABB.

I also agree with the guy who said the market timing on this is bad since it might go down before you can sell.

OP

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

7y

Originally posted by @Thomas M.:

I think this idea is not feasible.

I rent out a 5BR place in Hollywood on ABB and I can tell you it sucks. The guests are very difficult. They expect the world and they freak out if any little thing is wrong. It's a ton of work doing ABB in a large Hollywood house. As for the instagram photoshoot idea, I just don't see where you would find a lot of paying customers. LA is full of free locations that you can use for photoshoots.

Throw in a rehab and you are completely screwed on ABB.

I also agree with the guy who said the market timing on this is bad since it might go down before you can sell.

The "instagram photoshoot" angle would definitely be lucrative. Sure there's many free locations...but every tom dick and harry uses those locations. People are willing to pay for a location thats private and provides an air of exclusivity. A nice shot overlooking the city from a pool in the hills would be worth a few hundred bucks a day...the subjects would bring several outfit changes, take a bunch of pics in each outfit, then post the pictures throughout the year. They'd even bring winter clothes to post pictures NEXT winter.

I wouldn't be surprised if they brought birthday balloons and a cake. "Celebrating my birthday in the hills! #blessed"

Thanks everyone for this great info! The ABB angle seems like too much work for too little return.

Lynnette E.

Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes

7y

One thing I have learned is that the higher the price of the rent, the more difficult the renters are and the more they demand. I would think it would be impossible to have dust free, odor free, noise free, perfect house and yard for renters at the same time you are actively remodeling it. I would expect many, many renters to complain and get their stay comped. That is the market level you would be dealing with.

Either quickly remodel and list or make it a rental. Don't expect high level renters to house hack your project house! And don't expect high level renter to want a roommate, maybe a maid would be ok. And do expect them to use the house roughly and lots of repairs.

Karen MargraveBusiness Member

Moderator

Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes

7y

@Ian Dunross Sorry, but my thoughts are these are bad ideas all around. You're not going to find any construction crews in southern CA that are going to work around such a schedule, and I seriously doubt, you'll find any Airbnb guests willing to do it either, plus throw in using it for photo shoots or ? It would be a logistical nightmare.

The question is, what is your experience, that would entice investors to put their money into a syndication with you? No offense but It sounds like taking spaghetti, throwing it up on the wall and seeing what sticks. Not really a formula most financial investors are interested in.

OP

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

7y

Originally posted by @Karen Margrave:

@Ian Dunross Sorry, but my thoughts are these are bad ideas all around. You're not going to find any construction crews in southern CA that are going to work around such a schedule, and I seriously doubt, you'll find any Airbnb guests willing to do it either, plus throw in using it for photo shoots or ? It would be a logistical nightmare.

The question is, what is your experience, that would entice investors to put their money into a syndication with you? No offense but It sounds like taking spaghetti, throwing it up on the wall and seeing what sticks. Not really a formula most financial investors are interested in.

Spaghetti sticks when properly cooked.

AirBNB is a bad idea...however the photo shoot angle has more legs than I originally thought. People in LA (not me) are paying to use private jets for photo shoots. They pay to pose in front of, inside a jet. This is the age we live in.

I own a few duplexes and I'm about to close on a 12 unit building on the east coast...20% down with an owner carry-back. I'll be getting good cash flow...but it doesn't have any panache, any pizzaz etc...

You're absolutely right about the investors...I'm probably gonna work harder at my music business this year to earn the down payment myself. That way I'm not accountable to anyone!!

Robert ChuangPro Member

Realtor · Arcadia, CA · Member since 2014 · 145 posts · 46 votes

7y

@Ian Dunross I would recommend to hold off on the luxury market since the market is shifting here like what @Nabil Suleiman said. If it is 6 months rehab, you may be okay.

I attended one of the FIBI meet up here in LA last night and @Will Barnard was on the speaking panel. He was heavily into luxury market and his 2 cents are selling most of his luxury assets as soon as possible. Maybe he can share some knowledge with ya

Robert

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Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

7y

Thanks for the shout out @Robert Chuang

As to the original idea of renting out or even shooting while under construction is not a viable idea or strategy at all. There are so many moving parts to a high end remodel or construction site and trying to do both simultaneously is literally impossible. Hate to dump on your parade but its better to know the facts rather than have someone blow smoke up your rear.

As others stated, the market has slowed considerably, especially in the upper higher end so investors need to be very careful moving forward. I am in sell mode and any purchases are made with extreme care and caution, ensuring the spread is extra safe.