All Forum Posts by: Will Barnard

Not at all, the small details like lighting and plumbing fixtures (as well as new door hardware which can make an old door look new again) are what people see and touch. When they are nice and provide that pop/wow factor, it helps a lot and is not that costly.

Makes sense. I personally would want to see a side by side comparison of investment options vs taking the 30 year now and se where I come out on paper for those options before making that final decision.

This is pretty general so my answers will be too without full details/photos/your market conditions/etc.

Typically, kitchens and baths will give you the biggest bang for your buck on value. Curb appeal is another, so having good presentation in front and then rear yards is important and valuable.

Flooring/painting are also good value adds. For rentals, you do want durability so avoiding carpet is a plus and quality counter tops that last is also beneficial.

Difficult to say without knowing what you get for that $9700. That said, typically, these high priced programs are a rip off, but not always. Much of the info they give can be ascertained for free but it takes time and work to gather that info. Speaking with other serious and experienced investors is a great way to build your knowledge and get great ideas of what is working and what is not in your area. Yo9u can do this right here on BP as well.

@Lucas Martinez - One hole I see in your thinking is the 7/1 then refi into 30 year in 7 years. I am willing to bet my mortgage that interest rates will be higher in 7 years, not lower so locking in incredible long term low rates today makes better sense in my book.

As to returns, another poster stated 9 years to get the return. 9 years to get your principle back is still a good rate of return, especially when you consider that in 9 years from the day it is built, your investment is still there and likely has appreciated (since it is in CA) so your total return is much higher. Your repair costs should be low for the first 10 years since your unit is new so that is another bonus.

I built a 750sf 2+1 with laundry ADU (detached garage of approx. 350sf conversion/addition) in Sherman Oaks, CA with a new driveway to it and all utility connections. It was about $200k (albeit last year!). Owner is getting $3k monthly rent (and could easily get $3200-$3300 right now). So his particular investment is paying off very well and very fast. It could no be repeated as good today since construction costs have skyrocketed here in So Cal this year, but it would still be a goo investment for someone.

I find that ADU's work well in very established higher priced neighborhoods where rents are high and the dirt is already owned so your returns are better there than a lower valued neighborhood with lower rents. I have several ADU plans in plan check that should be ready to build 2022 and almost all of them are for those who intend to rent them out and remain in the main home.

If you want to be accurate with rehab numbers, don't use an arbitrary price per SF, it does not work no matter who claims it does. Sure it could be right a few times, but so is a broken clock! House 1 and house 2 are identical in size, bed/bath count/lot size, and area. House 1 needs a new roof and new HVAC along with all the regular stuff like kitchen upgrade, flooring, paint, landscaping. House 2 needs just the regular stuff. If you used a price per SF for your rehab number, you would be way off on one of these examples. There are NO shortcuts to accomplishing this process, you either need to hire someone who knows how or learn how which takes time and lots of practice.

For ARV, you must use SOLD comps just like an appraiser would use within 1/2 mile and within the last 6 months (although many markets now need to be within last 3 months since price fluctuations have increased so much. Taking the average of 5 comps is one way to have a decent ARV (not too aggressive and not too conservative), however, your specific market and your level of rehab will dictate if you get the top price or the "average/median" price of the comps. If you have 1/2 bath less or more, you need to know what a bathroom is worth in your market and make the adjustment. Calculating ARV is just as much an art form as it is science/math.

Transaction data in your market area is what you need (from title rep or RE agent). Get the inventory levels of today and past to see what your market is doing. The average DOM (days on market) is a key indicator as well as absorption rates. It is said that a 20% or better absorption rate equates to a sellers market. When flipping, you want a sellers market. It makes the buy side difficult but the sell side a breeze (if you rehabbed it right). 

Here is your definition of absorption rates in real estate: 
The absorption rate is defined as the rate at which homes that are available in a market are sold over a given time frame. The rate is calculated by taking the number of homes sold within a period—say, over 30 days—and dividing that number by the total number of available homes in the market.

 This is a very good answer. In almost all cases, when a property sits for 3 months without an offer, it is overpriced. It could also be that your rehab/finishes/curb appeal are not up to local standards to attract the buyers but price overcomes all objections.

What can you do now and next time? Study your market better. Get data from your title company or RE agent showing average DOM (days on market) for listings in your subject property area, find out how many homes are currently for sale, pending and sold today, 6 months ago, 1 year ago, 3 years ago. This data will tell you where the market was and is which is your best crystal ball for where it is going. Knowing inventory levels will help you make better decisions. You should also study up on what the homes that sold have in them (your quality level of finishes should match or exceed your competitors if you want top dollar).

Well isn't that the truth! I just took over a project for an investor client who had to fire his contractor (same one he hired to do a few items on the last one I helped him out on and they screwed that up too). I have probably done more work in 3 days than the other crew did in a month! So to your point, having a good contracting crew for flips or value adds on holds is priceless!

From a flip perspective, NELA is a great market and I have been investing there for many years now. Working on a project now actually in Highland Park. Sold several in Atwater Village and also more in Highland Park.

Buy and hold is tough to cash flow anywhere in LA so you really have to find a good deal with major value adds and often times, sustain a year or three with slight negative cash flow but have massive appreciation both market and forced.

South and East LA I am less familiar with except for south Bay (Gardena/Torrance/Etc.).