All Forum Posts by: Bob Ritner

In you post it looks like you are wanting to go direct to the insurance carrier on line. I have multiple condo and multi-family rentals in Orange County and finally started going through a broker about 10 years ago. No problems since. If one carrier has an issue, they find another and the rates have been very reasonable.

 I was really curious a couple of years ago about how I would have done in an S&P 500 index fund over the past 24 years vs my real estate investments so I did a detailed analysis comparing the total return of SPY vs the pre-tax net income from my rental properties plus rental property appreciation. What I found was that my real estate portfolio returned 1/2 percent less than SPY's total return before factoring in real estate leverage and depreciation. After factoring in those two items, my real estate portfolio won hands down. The caveat to all of this is that I was conservative with my real estate purchases and leverage, and only purchased with the numbers told me to purchase. 

 Spot on

I retired at 52 ( now 59) and live off the cash flow from 5 doors; class B properties in Orange County by the beach. Started buying in Y2K using leverage but paid off each using cash flow, living off my day job and using HELOCS on existing properties for the down stroke on new ones. Contrary to conventional wisdom of refi-til you die we always paid off as soon as possible.  I self manage but this takes minimal work as we do full guts when we bought.... including new sewer, electrical, water, new roof in addition to all the cosmetic stuff ( no lipstick on the pig remodels). As a result the ongoing maintenance is minimal and we keep tenants long term. I am not pulling in 200k net like Bill, but have plenty to live comfortably on SoCal and to do all the stuff we enjoy; traveling, long distance sailing etc. It was not get rich quick, but at the end of a couple of decades it has been rewarding enough for us. If you look at our cap rate based on current values it is pathetically low, and many would think we are idiots not using leverage to keep expanding, but we are happy where we ended up.

I have 2 duplexes that had the same issue. All of the plumbing was on one side of the buildings so we ran a new ABS lateral in the side yard and ran new abs branch lines from each fixture to the lateral in the side yard. We did this as a part of larger property renovations so we were not trying to save flooring, cabinets, etc. The actual plumbing, slab cut and patch was about 12k for each of the duplexes, but if you are not doing this as a part of a interior renovation, the related demolition and replacement of cabinets, finishes and fixtures it would add thousands more.

I have had rental property in California for 26 years and have met with two separate attorneys on this issue. Both of them essentially said:

1. Umbrella policy is cheaper than multiple LLCs and in some ways provides better liability protection. Mine costs less than 1k a year for a million in coverage above and beyond my property insurance liability coverage and I don't need to pay an accountant to do separate LLC returns.

2. LLC veils can be relatively easily pierced and if they are pierced they you wish you had opted for #1 above instead of the LLC.

3. Unless you own properties worth many millions, the Umbrella is usually the best option. The attorneys I met with indicated that it may be worth considering LLCs for high net worth individuals. At the time I met with them, I had 6 properties valued at a total of about 4 million and In their mind this was far too low to consider LLCs.

California, to my pleasant surprise passed a new law that went into effect January 1 that allows property owners to file a Letter of Agency with local law enforcement which notifies them that the property is vacant. The letter can be valid for up to a year and allows squatters to be treated as trespassers and removed by law enforcement.

@Bruce Woodruff:  I would have probably charged at least 10k, but that is a rough guess. My practice was commercial and institutional architecture and I specifically avoided residential because the those clients typically had no clue how much it actually cost to produce a solid set of plans that gave contractors enough information to give solid bids.

I am a retired architect and current REI investor in Orange County and did an adu at my property in San Clemente recently. Here are the fees I paid:

Architect (me) : $0

Civil Lot line and topographic survey: $6700

Soils Report: $3700

Structural Engineer: $4000

T24 Energy calcs: $500

Plumbing And Electrical design: $1600

Total =$16,500 (engineers only)

These fees are only to get through permitting, as the city required certain field reports from the engineers that was billed to me hourly. Also, mine was a 2nd story ADU so a bit more complicated. You mentioned "architect fees" and not all the others that are frequently required so I am not sure what your quote includes. If it includes all engineers required for permitting, then I would say the fees are pretty reasonable, even if they are plans out of the drawer. You could run one out of the drawer set of plans through 10 different jursdictions and get 10 different sets of plan corrections and each site is different, with each jurisdiction having different site plan requirements. To get plans through my city I ended up with 40 pages of plans including engineers. If you know what you are doing you could save a few bucks and hire a drafter but that is a much more hands on approach. You will find that most cities in OC have pretty extensive plan requirements compared to other areas of the country.

If you already have the fault line mapped with a fault trench study, then that is one big variable out of the way. The second thing I would do is have a soils report done, where they do some borings to determine the composition and orientation of the underlying soil/bedrock. Based on this, they will opine on the developability of the site and give preliminary foundation recommendations. You do not need them to develop the full report, just preliminary recommendations based on the borings laboratory findings. This prelim report can then be given to a residential contractor that can give some very rough numbers on grading, retaining and foundations. This is where all of the big budget busters usually occur.