Duplex in Bakersfield with guest house, need advice

14 Replies

Hello,

I am new here and it would be very helpful to hear your feedback. I live in LA and have an accepted offer in Bakersfield to buy a duplex. Both units 2/1 (2'tandem' bedrooms, one of them is very small, like a sun-room). Currently rented for 750 each unit.Price of the duplex is 185K. It is in a older area, house build in 1925 and has a charming fire place and retro feel to it. There is a garage with kitchen and appliances aka 'guest house' potential rental as a studio , currently is not rented but potentially could be for 450-500 with some tiling and flooring fix.The electrical of the garage is tied to one of the unit.

Need advise in following:

- How would you approach the possibility of renting the garage: owner pays bill for both and rise the monthly rent? (or rent it out to a potential tenants as together deal 2 + separate 1 and tenants pay the bill? Is it even realistic?

- Will the fact that the building is 1925 is a negative in appreciation or it won't matter in a 'charming' older area?

- Does this deal 185K/1500 monthly +plus guest house sounds as a good de

What area or cross streets is it? 

It depends on the area. 185 in Bakersfield for a duplex sounds really expensive. You can find on market duplex deals hitting the 1% rule of thumb in Bakersfield. Not in all areas, but in c areas you can. 

Hi Josh, thank you for the reply. It is in Alta vista neighborhood. I am trying to stay away from a 'rough' areas... This duplex is occupied by two ladies and I though I can even do 'managing' by myself. Truthfully would need and advise of what managing costs i should expect. 

Alta vista is a decent area. How many sqft is the duplex?

I'd be careful about a garage conversion. 

Make sure you get the right permits and make sure you calculate for the less than market rent you'll get. 

For management I usually see 100 to 120 bucks a month for a duplex. That doesn't include advertising and lease up fees. 

It sounds like it could be a good deal if you can get the garage rented. That would make it close to a 1% deal. However, the garage situation is complicated. 

Do you know if the garage remodel is permitted? If not, you don't want to rely on being able to rent it. If the garage remodel is not permitted, then the deal doesn't look very good.

If the garage remodel is permitted, then try to rent the garage with the unit it's tied to and raise the rent. 

My guess is that the garage remodel is not permitted. If so, your purchase price should not factor in income from a bootlegged garage unit. In fact, you should probably factor in costs to convert it back to an actual garage.

Thanks Brad and Josh. Josh, thank you for the management fee info. What is your opinion regarding the year build(1925?) The  size is over 2000sq ft. 

Brad, the garage is not permitted. What could be the downside of using a not permitted garage for rent?

In general I would like your guys input on what  is the better alternative in Bakersfield? I am in LA and this city at least in some reasonable distance to compare to out of state investments. What neighborhoods have best deals in Bakersfield avoiding a risk of having a tenant who will trash the property  and cause problems?

Julia - You run the risk of being fined by the city for renting out an un-permitted space. You also run the risk of the city making you convert the unit back to a garage. If your tenant gets mad at you, all he has to do is report you to the building department. If something were to happen to a tenant in the unit, ie fire, earthquake, etc, you could be held liable because you allowed someone to rent a space you know was not permitted and possibly not safe. Since the conversion isn't permitted, the construction would not have been inspected so who knows what kind of corners were cut. I would definitely not factor the garage rent into the price of the purchase.

When was the last time the unit were renovated? 1925 is pretty old and you will probably have higher maintenance costs especially if it still has the original mechanical, electrical, and plumbing systems. How old is the roof? There are good rental opportunities all over town. If you find a decent neighborhood, good tenant screening will mitigate alot of risk.

 

Hi Brad, thank you. I seen the tenants they are actually are nice. I am curious though what could be a better deal in Bakersfield in a decent neighborhoods? House prices are about 150-200  and more and they rent appx 1000-1300 (3/2). There are multi-family properties that are better cash return, but they are in a 'sketchy' neighborhoods... What is the alternative for your opinion? What I can get if i pay cash for example?

Downside of not permitting garage is is that tenant can ask for all their rent money back, and it probably won't qualify for conventional financing if it's not permitted.

1925 is really old. I'd make sure all the pluming is in working order (not galvanized). If it's on a raised foundation changing it will be cheaper. Also, check the electric and make sure the box is big enough to support a duplex. Make sure to get affidavits from the tenants and ask them if they have anything they want fixed in the place. 

Personally, I wouldn't buy a duplex in Bakersfield for 185k, but it is in a good area.

Hi Josh, you sound like you have an idea of a better deals. Could you give me an example? What neighborhoods and what prices? Is that in Bakersfield or you have other cities in mind?

@Julia Fergo For WIW on the unpermitted garage, I have been called to service a non-permitted garage, when the buyer bought the house and wanted to kick out the tenant living in the unpermitted space, the tenant called the city before they left. The buyer ended up paying to convert it back to a garage, permits alone were 900, my services ran around 7k for the conversion, he said he deducted 10k from his offer, just in case something had gone wrong with the living space, this case, he covered everything on a worst case scenario. I wouldn't count the rental income on the unpermitted space when analyzing the deal, would also project if city says something about it.

@Brad B. haha...This one actually is a pocket listing....:) but i think today market sellers are not stupid and want to sell market price...well...I will do some more research to compare...Thanks!

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