Hillside duplex

8 Replies

Hi BP,

I am in escrow on a hillside duplex in a popular area of Los Angeles, numbers wise, the place is about break even with my long term buy and hold strategy, but will allow me to build equity, credit, and take some tax breaks. 

Does anyone have any experience with hillside properties? what additional foundation, drainage, retaining wall issues should I be aware of? Do you typically budget additional expenses? Any rough estimates on build costs for hillside drainage to prevent land erosion (1000's, tens of 10,000s?)

Thanks!

The whole things sounds highly risky though I know that type of property can be popular in your area.  If the numbers are break even I hope that is taking into account vacancy and maintenance and if not you will most likely be negative cash flow. Good luck

Hi @Hyuma Leland  

Be sure to checkout the Baseline Hillside Ordinance so that you understand any limitations you might face with improving the property in the future.

I'd suggest also getting a geological inspection, in addition to your generic inspection if you suspect there may be foundation / drainage issues. It'll cover drainage, grading, soil/rock conditions, seismicity, and erosion protection.

Thanks Curt Davis and Joshua McGinnis. I have taken into account 8.5% vacancy and 5% of gross income for repair fund. Hopefully this is enough considering new electrical and will have new roofs and copper plumbing/ abs drainage by closing.

I will certainly look into the baseline hillside ordinance. ( thanks for the tip. Love BP!)

We have a foundation specialist coming out and will do geological survey if there is any question it needs assessment. Geo survey is expensive! Sounds like it will run us over 1000$

Thanks again!

Hyuma

Hi @Hyuma Leland   , 

I have looked at and been in escrow in a number of properties in Eagle Rock, Echo Park and Silver Lake.  In my experience if you can have a contractor and architect walk the property they can give you a general idea of the construction and the properties of that geographic area for a reasonable price.  While that is absolutely no substitute for a battery of surveys (soils, etc) performed by the appropriate engineers, it can help get you a basic idea about the property and what kind of work might be necessary.  

Often times if there is an issue with the retaining wall, it will be apparent (cracks, tilting, etc), same with drainage (evidence of past erosion, water pooling) and foundation (cracks, displacement, etc.).  They are all expensive and retaining walls and drainage can often bring in your neighbors (and their attorneys!).  Hillside properties are lovely, but they can come at a price!    

I have found that everyone in a certain area with construction of a certain age has to deal with the same issues.  Try to talk to some professionals who have done a lot of work in the area, and perhaps hire them to work on your property if necessary! 

Please let us know how it goes!

Josh Prince, thanks for the tips. I have the foundation inspector coming out today. Will keep this thread updated.

Luckily, the property has open lots and no immediate neighbors on the left, right and back. So I'll be able to dodge neighbor issues and only have to contend with the city.

Hi @Josh Prince  , the foundation inspector gave some great insight into the structural integrity of the property today. The major finding was that the foundation was inadequate, shoddy, and unsafe. Major sections of the foundation were covered from view, extensive drainage issues were present. He estimated $50-100k in repairs. Needless to say, I am cancelling the deal.

Some learning points:

1. Be careful of hillside properties! If anything looks fishy related to foundation or drainage, Run...don't walk!

2. Inspections are a must, especially for new buyers. We did spend $800 on inspections, but we saved up to $100k in repairs. 

3. Contingencies are important even in competitive markets when a property is marketed in "move-in" condition. 

4. Perseverance. This deal may be dead but on to the next one!

Thanks again everyone for the help!

Hi @Hyuma Leland  - thanks for letting us know what happened.  Sounds like that was money well spent to avoid an expensive situation.  I assume there was no way to get any kind of reduction from the seller to make the deal worthwhile?  If you disclosed the information to the listing agent, he will be obligated to tell any other potential buyers.

You are correct, there was no concessions to be made that would make it worth our while to close on this deal.

You are also right about the listing agents needing to disclose this information to any future buyers, they were not happy about it and let our agent know.

Thanks all for the encouragement throughout the process. On to the next one!

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