All Forum Posts by: Andrew Erickson

@Jackson Wu, Yes, valuing these properties is tricky. If you use the San Diego median home price of $366/sqft (according to Zillow) you would get 380sqft*$366/sqft=$140k. Median listing price is $468 which gives you a value of $178k. You could charge a premium since this is a stand alone unit. Usually studios rent for more per sqft than large multi room homes. But then you would have to discount it since you have to find someone who wants tenants in their backyard. 

Whatever the price is, buying at $50k is still a great deal! 

@Mike Reynolds, No, I hope to expand outside of California. I just want to start where I live because that seems easier than trying to identify markets and regulation in other states. 

@Ron Drake, the new ADU regulations state that the city must provide the water, sewer, and electrical hookups to your unit (at a cost). The ADU needs the same fire protection as the main home. Most homes do not have sprinklers, so most ADUs would not need sprinklers. They are treated very similar to bathroom and bedroom additions. The new bill is supposed to make ADU very easy to get permitted.

@Jackson Wu, these would be completely legal granny flats that can be rented out. California likes the term ADU since it implies it has a kitchen, bathroom, and independent entrance. As long as you have those and other basic construction requirements they can be rented out. The only catch is it cannot be sold separately and the owner must occupy one of the homes.

I came up with that $150k number by the rent income: $1,200/mo * 12 mo * 90% occupancy / 8% cap rate = $162k. I rounded down since it has extra restrictions that devalue the property. Even if it is worth $100k, it is still a good deal for the customer! 

Yes, I totally agree it would be great to find finance options for people. A HELOC should be easy to do, but having other options would be great too. This is within reach of a 401k loan too. $60k loan paid off at $1,200/mo would take less than 5 years to pay off!

You know the bigger pocket podcast hosts invented that phrase, right? That's why BP is closely linked to it. 

I personally think it is a perfectly fine term. It is stretching the term "hacker" a little, but it makes sense. Your suggestion of "owner-occupied multi-family investor" is pretty silly. You want to replace a 3 syllable phase with a 13 syllable phrase?! Maybe "owner-occupied rental" is a good compromise? 

Here is a strategy I've been working on. I have a business where I design products and have them mass produced in China. I ordered over $200k in wholesale orders last year, so I am very familiar with the whole China production and import business. I was looking into some business models where I can marry my China import skills with real estate. I came up with buying kit homes produced in China and putting them in people's backyards.

These homes are semi pre built and fold together to fit into a shipping container. They come with plumbing and electrical already built into the home. They can be made with any finishing you'd like and can be designed to meet local standards. There are several sizes, but I would go after a model that is 380 sqft. It includes a full kitchen, full bath, and a small bedroom.

There are new regulations in California that allow tiny homes to be placed in backyards very easily. These homes are called auxillary dwelling units (ADU). You can read more about those rules here. If the unit is under 500 sqft, meeting fire code, and a few other small requirements, it should be very easy to build these homes.

I can produce these homes for $11k each. It costs about $4k to ship them. I figured I would add another $5k in costs to transport the home to the end customer and assemble it onsite. That is a total cost of $20k/home. A home this size in San Diego, CA rents for at least $1,200. I verified people would be willing to live in a space like this by making a Craigslist ad. I got over 100 responses in under 24hrs (see the screenshot) so the demand is real! A unit that rents for that much should be worth about $150k, right? I figured I could charge $40k-$60k to do the whole thing for the end customer. That's a $100k value proposition to the customer. And I would make $20k-$40k on each sale.

I have already talked to several people who are willing to buy my first sample home. I just need to do all the work to get them this home. Right now I need help finding a contractor that could help me oversee this project and a permitting people to help navigate the whole process.

BP forum, please poke holes in my business plan! Or give me some advice on where to go next.

Here is a strategy I've been working on. I have a business where I design products and have them mass produced in China. I ordered over $200k in wholesale orders last year, so I am very familiar with the whole China production and import business. I was looking into some business models where I can marry my China import skills with real estate. I came up with buying kit homes produced in China and putting them in people's backyards. 

These homes are semi pre built and fold together to fit into a shipping container. They come with plumbing and electrical already built into the home. They can be made with any finishing you'd like and can be designed to meet local standards. There are several sizes, but I would go after a model that is 380 sqft. It includes a full kitchen, full bath, and a small bedroom.  

There are new regulations in California that allow tiny homes to be placed in backyards very easily. These homes are called auxillary dwelling units (ADU). You can read more about those rules here. If the unit is under 500 sqft, meeting fire code, and a few other small requirements, it should be very easy to build these homes. 

I can produce these homes for $11k each. It costs about $4k to ship them. I figured I would add another $5k in costs to transport the home to the end customer and assemble it onsite. That is a total cost of $20k/home. A home this size in San Diego, CA rents for at least $1,200. I verified people would be willing to live in a space like this by making a Craigslist ad. I got over 100 responses in under 24hrs (see the screenshot) so the demand is real! A unit that rents for that much should be worth about $150k, right? I figured I could charge $40k-$60k to do the whole thing for the end customer. That's a $100k value proposition to the customer. And I would make $20k-$40k on each sale. 

I have already talked to several people who are willing to buy my first sample home. I just need to do all the work to get them this home. Right now I need help finding a contractor that could help me oversee this project and a permitting people to help navigate the whole process. 

BP forum, please poke holes in my business plan! Or give me some advice on where to go next. 

Yea, you'd have to have at least 4 full containers to get to 1200 sqft. That's not the market I'm going after. 

@Felipe Lois Affini, re: "1200 square feet as the minimum standard size for new constructions"

This seems huge to me living in downtown San Diego. Across the street from me a single family home just sold for $600k. It is 100 years old and only 770 sqft. 1,200 sqft seems like the maximum size in this neighborhood. It is funny how different the coastal cities are from the rest of the country. 

@Richard D., wow that is great! Where are you manufacturing your container home? In China or locally? 

@Felipe Lois Affini, Yes, you can certainly build the homes modularly and connect them like Legos. I have been thinking about that. It adds a little complexity to the design and increases the costs, but might be a great idea to get around regs in certain cities. 

Partnering with a certified facility is a great idea! I'll start looking into that. 

I recently bought a condo. This website from NY Times was a huge help in deciding buying vs renting. It is the most comprehensive calculator I’ve found. https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html I pulled numbers from HUD for average appreciation and rent increases so I wasn’t just guessing (too much). For me the crossover was owning for about 2 years on average and 6 years for an 80% confidence level. Then when you add in that I have a roommate so I can house hack, I’m planning on owning this condo as a rental when I move, and refinancing the capital out for the next down payment, it is a no brainer. I make A LOT more by owning vs renting.