All Forum Posts by: Will Barnard

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Good point on property managers, they do suck, mostly.

I think for someone wanting 50+ doors, they should be looking at acquisitions without meter splitting issues to begin with, solves that problem. Having just a few is no big deal per my point above.

Your all in % on what type of investment and strategy? For fix and flips? Good luck on the 70%. Be lucky if you hit 80%. For development deals, you can hit 70% of you land a really good buy, know what you are doing, and get your construction numbers down to a small +/- margin of error. With any flip, time is your enemy too. You cant just look at what all in number and go searching for that as there are so many details that go along with that (time of hold, amount of repairs/construction, time to get permits/arch design, location, the individual investor's abilities and network, etc).

Appreciate the honesty, I will reciprocate. It takes about 30 seconds to read the meter and another minute to calculate the math to bill it. Tenants notoriously abuse water when they don't have to directly pay for it. That is a fact landlords know too well. Secondly, as a professional landlord looking to own 25 doors, it would not be recommended to buy 25 doors all of which with this same issues, separating meters to bill water! The truth is, perhaps you have a few or even 10, and most likely, with that quantity, you have other rentals and as such, likely have a property manager to do these tasks for you.

So why would you want to do a lump sum utility when you have the easy ability to separate and bill the tenant for their exact usage!

Any plumber can add a submeter to the water line, you simply have to read that meter and then bill the tenant from that submeter reading once deducted from the main house bill. Very inexpensive way to submeter your units.

Dan you are making an assumption that the $100k cost to build is only worth $50k today. That may or many NOT be true. Secondly, when it comes to a long term buy and hold, and your goal is monthly cash in your bank, then that $14,400 is there no matter what the value is. Lastly, you have completely eliminated the probability of market appreciation in LA which is (based on history) higher than most areas of the country and the likely fact that in 5 years from now, appraisers and lenders will be giving full valuations of these products. So again, play the long game and add to your cash flow with low risk is the play here.

Are there higher returns out there, sure. You could have invested in Gamestop yesterday and sold today but could you do that consistently day in and day out like that cash flow comes in day in and day out? Doubt it.

For ADU valuations, you may run into problems as appraisers do not have enough comps or precedence to properly valuate an ADU. On single family properties, I have seen 25%-50% of cost valuations given by appraisers. That said, the strategy SHOULD be longer term hold periods to take down the cash flow and wait for a few years when there are enough sales comps to get proper valuations.

On the multi family level, if under 5 units, it is still considered residential and not commercial in the lending space, however, investors more often than not look at the income approach as that is what they are essentially buying (disregarding upside potentials and value adds). Therefore, if you convert a garage for $100k into livable space that yields you say $2k monthly in gross income, after an expense ratio (operating plus vacancy factor) of say 40% for the added unit, you have $1200 in cash flow (excluding debt service). So in 7 years, your cash flow returns your initial investment of $100k. That is a 14.4% cash on cash return, not bad. Add into that leverage and your cash on cash could go higher.

Point being, look at it from a long term hold standpoint and don't worry as much about valuations right after. ADU laws on multi family is a huge opportunity for you and are very popular right now. I have 3 ADU projects ongoing right now that I have started building or are in plan check currently for my clients.

I would have to disagree with Dan above regarding returns. While it is certainly true that a good investor can find better returns elsewhere, it is also true that returns can be outstanding when adding an ADU. Location is key and LA has one of the best opportunities for this as you already own the dirt and in cases of conversions, some of the construction is already there as well, so your returns can be in excess of 20% often times. Find that without having major risk in other investments!

For ADU valuations, you may run into problems as appraisers do not have enough comps or precedence to properly valuate an ADU. On single family properties, I have seen 25%-50% of cost valuations given by appraisers. That said, the strategy SHOULD be longer term hold periods to take down the cash flow and wait for a few years when there are enough sales comps to get proper valuations.

On the multi family level, if under 5 units, it is still considered residential and not commercial in the lending space, however, investors more often than not look at the income approach as that is what they are essentially buying (disregarding upside potentials and value adds). Therefore, if you convert a garage for $100k into livable space that yields you say $2k monthly in gross income, after an expense ratio (operating plus vacancy factor) of say 40% for the added unit, you have $1200 in cash flow (excluding debt service). So in 7 years, your cash flow returns your initial investment of $100k. That is a 14.4% cash on cash return, not bad. Add into that leverage and your cash on cash could go higher.

Point being, look at it from a long term hold standpoint and don't worry as much about valuations right after. ADU laws on multi family is a huge opportunity for you and are very popular right now. I have 3 ADU projects ongoing right now that I have started building or are in plan check currently for my clients.

First you must answer this question: What are your goals for your first year, first 5, and first 10 years of your investment and to achieve said goals, which strategy can get you there the quickest without undue risks added? Once you can answer that, you can then identify your specific niche strategy and then identify the markets in which that strategy is most effective for you and your skill sets and abilities.

Having some initial capital will help. BRRR in LA can work if you find a multi with value add opportunities and plan to hold for 5+ years. You will likely not have cash flow in the first few years but your appreciation, both forced and market will most likely (based on history) outperform any other market in other states. Investing in your own backyard is also a benefit logistically so that too should also be a weighing factor for your decision as to where.

"How low is the inventory where you guys are looking to invest, or buy your first home?" - Lowest can not describe how low it is! My recent property just sold in Jan for $245k over ask price at $2.24M. Scarcity defines the current market conditions here in Los Angeles and surrounding areas. COVID made it worse, not better.