All Forum Posts by: Bruce Woodruff

There are flush mount LED light kits for $10-$20 that replace those “boob lights” in 5-10 minutes max. Most even have a “light temperature” switch inside them. As Bruce noted, 5000k is KEY. Even if you have recessed lighting, try some 5000k replacement bulbs. You will be amazed and never tolerate the horrible yellow light from cooler bulbs again. 

For everything else, especially anything that will cost more than $200, check your competition. If you’re already nicer chances are you won’t collect an extra nickel in rent, though you may fill faster, but not if you;re already nicer. If you’re too far above the competition you may actually end up vacant longer and end up with a wash or a loss for the upgrades. Good luck. 

Quote from @Bradley Buxton:

@Adam Watanabe

Converting a garage is not the best idea for the exit of a property. Many people still want garages for primary residences. By having a garage converted, you limit the value of the home and the buyer pool to investors. At 120k/2k that is 60 months or 5 years on the return. @Dan H. has some good insights on ADU conversions.
Generally, it would be better to put the $120k towards the down payment of another property so you can gain the equity even if the cashflow is breakeven. 

thanks for the tag.   To the OP, I regularly check ADU addition underwriting.  I encourage accurate and conservative underwriting.  On an ADU addition, the most important aspect of the underwriting is to KNOW the value that will be added by the ADU.  In the absence of sufficiently comps, expect a very poor valuation.  

I suspect the cost to convert an 450' garage to an ADU will approach $150k. The issue is it will likely add ~$75k of value resulting in an initial negative $75k (a value subtract). This initial negative position needs to be recovered before any cash flow is obtained.

I am also a bit skeptical that a 450’ unit can achieve $2k rent in Sacramento.

Using 50% rule (expenses other than mortgage is 50%) on a financed ADU, 8% 30 your loan at 80% LTV.

$2000 - $1000 (50% rule) - $881 (P&i) = $119/month
$75k/$119 = 630 months to recover the initial negative equity. This is 52.5 years.

Let’s use OP’s $120k with $45k initial negative position.
$2000 - $1000 - $704 (P&i) = $296/ month
$45k/$296 = 152 months or 12,7 years to recover the initial equity.

Building a single smal, unit is very expensive development.

Here is a list of why adding a single ADU in single family zoned areas in my CA market is typically a poor RE investment:
1) The value added by the ADU addition is often significantly less than the cost of adding the ADU. Search the BP for ADU appraisals to encounter numerous examples. This creates a negative initial position. This negative position can consume years of cash flow to recover. Make sure you know the value the ADU will add to the property before building the ADU.
2) the financing on an ADU is typically far worse than for initial investment property acquisition or is often not leveraged by the ADU (HELOC, cash out refi, etc). Leverage magnifies return.
3) The effort involved in adding an ADU is comparable or larger than a rehab associated with a BRRRR. However if I do a BRRRR I can achieve infinite return by extracting all of my investment. Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).
4) Adding an ADU is a slow process. It can take a year or more to complete an ADU. During this time you are not generating any return from the money invested in the ADU. This amounts to lost opportunity because if you had purchased RE, at the closing it can start producing return.
5) ADUs detract from the existing structure whether this is privacy, a garage, or just yard space.
6) this is related to number 1, but there are many more buyers looking to purchase homes for their family than there are RE investors looking to purchase small unit count properties. This may affect value or time required to sell.
7) Adding an ADU does not make the property a duplex. For example in many jurisdictions I can STR units in a duplex but cannot STR an ADU (some jurisdictions will let you STR if you owner occupy). Duplex have different zoning that may permit additional units. Duplex can always add additional units via the ADU laws.
8) Related to number 1, purchasing a property with an existing ADU is cheaper than buying a property and adding an ADU. Why add an ADU if it can be purchased cheaper?
9) adding multiple ADUs or adding an ADU to a quad looses F/F conventional financing. This reduces exit options and affects the value.
10) Small number of small units is the most expensive residential development there is. This implies residential units can be built at lower costs and provide better return than building a single ADU.
11) adding an ADU to SFH can make the SFH fall under rent control. In CA currently only MF properties are rent controlled. If the house is older than 15 years old and an ADU is added, it can become rent controlled. Rent control laws are market specific. Make sure you know the impact that adding an ADU will have on any rent control.
12) investors seldom include the land value in the overall ADU costs. The reality is the land has value.

Good luck

Quote from @Carolyn Fuller:

Quote from @Lauren Kormylo:

I don't have international guests.  But this absolutely will affect international travel.  I have family and friends in Canada who regularly visit the US, and they've cancelled all trips for the foreseeable future, they are hopping mad.  I don't know how much this will affect guests from other countries, but it is bound to.  I hope since your guests come mainly for the school there, you'll be spared a lot of it.

Unfortunately, this administration is at war with universities and scientific research and I rely heavily on Harvard & MIT which are taking major hits. They have already frozen hiring and I suspect that means there will be fewer visiting scholars. That certainly feels like what is happening, given the fact that our MTR inquires are way down and we haven't leased the full calendar year.

There are 4 legs of our retirement income and 3 of them are under threat (Stock Market, Rental Income, Social Security). 

I agree that we really don't know what will happen with Social Security but Musk has certainly been rattling his chainsaw. 

We know what is happening to the stock market but some people think it is short term pain and others fear a recession. I'm a lot less sanguine than @Bruce Woodruff but I also am in wait and see mode. 

And I know for a fact that my rental income is taking a major hit. It now just depends upon how large a hit. So far, I know we will be down by at least by $6000 this year.

Sigh... 

You're coming off a bit too emotional.

If you've read the boards the last year there's been a few of us saying this level of correction has needed to happen. It's a disgrace the previous administration let it froth this much. And beyond stupid that the average investor created and bought into the rally post-election. 

As someone deeply involved in the markets for most of my career(pre-retiring) the way it was headed was absolutely going to end up in some form of devastation. This will end up in indisputable (short-term) pain, but the policies are outright positive for the American people. 

Coming now and wondering why it's happening is really showing incredibly little understanding of the economy & markets. It's embarrassing actually. 

Your going to get hit in Cambridge, for sure. So are all of us across the country. There's going to be a level of (short-term) austerity; embrace it. If you were positioned appropriately, you'd be ready for this not panicking on the internet. You'd be capitalizing on it. 

My electrician was doing a job in Washington DC , it is a 2.3 million dollar house ( not sure of exact location ) .  They look out the window and 4 guys are in their trucks , they run out and confront them , and the guys pull guns on them . The electricians backed away and said take what you want . So they laded tools and wire in 1 truck and stole the truck and tools . The other truck was a stick shift .  

Then 3 days later the HVAC crew was there  ( unaware of what happened  before )  they unloaded all the equipment in the garage and low and behold , they also got robbed by gunpoint . 

The GC is demanding that they both return , and neither will , because their employees just wont do it . And the owners refuse to put the employees in danger . 

And a guy was killed across the street 2 weeks earlier .

There are some jobs that arent worth doing no matter the price .     

So if you are buying in a rough area , understand that a lot of contractors wont work there 

Quote from @Jay Hinrichs:

Quote from @John Underwood:

Quote from @Jay Hinrichs:

have you personally seen this happen to you ???  lots of hysteria out there and news likes to get clicks. 

 I agree. I don't necessarily believe this article.

I have seen some Canadians say they are not coming to the US because they are mad LOL.. 

Back in 2016 we were camping in Myrtle Beach , Pirate Land campground . There were lots of people from Quebec Canada .  Well they complained about all the Trump flags .  The campground told them if you dont like it feel free to leave , this is the USA we have freedom here , OH by the way , no refunds ............................. A lot left