All Forum Posts by: Chen Zhou

@Travis Biziorekpaying with cash = better purchase price = higher likelihood of achieving higher cap rate...

And yes, you are right. I have no intention owning in crappy neighborhood that doesn't have upside...

@Travis Biziorek thanks for sharing. Yeah, for certain neighborhoods in town, looks like 2% would be very very difficult unless you can pay by cash and be able to a bunch work on your own. Where do you typically find these 2% and above properties?

@Constance Kawa-Small Compared to Pittsburgh and Cleveland at least, I was attracted by the size of the opportunity (potential upside) and timing of the market (Detroit just started to climb back up from bankruptcy so has a lot more room for appreciation). The infrastructure in Detroit also makes it easy for any business to expand. Also other smaller factors such as low property tax and no rent controls, etc.

@Jim G.$4850 sounds about right...yeah, the amount is pretty much determined by the city...so just pay them so that you get your permit as soon as you can.

@Brian Larson I was under budget...so pretty happy with the results. I didn't add all the bells and whistles (since I'm building it as a rental) and did much of the landscaping myself....

@Matthew ForrestYes, it's a company called Matterport. I find it really easy to have 3D visual handy when you are trying to find potential tenants...

@Hai G.Every city in the bay area is different in terms of speed. Mine was in San Jose and took about 3 months to get permits. Construction is another 6 months, depending on what time of the year you get started (avoid rainy seasons at all cost!)

San Jose is probably one of the most friendly ones...The city just started an express review service on Tuesdays, where homeowners can make appointments to meet directly with city staff for a single, comprehensive review of their ADU application, for qualifying 1-story units up to 900 square feet. If no revisions are needed, homeowners could potentially walk out with a building permit in less than 90 minutes.

Investment Info:

Single-family residence other investment in San Jose.

Cash invested: $200,000

Attached ADU built in my San Jose property backyard (630 sqft). 15% annual CoC return.
3D visualization: https://my.matterport.com/models/hRAxQheq93H?section=media&mediasection=showcase

What made you interested in investing in this type of deal?

1) maximize the value of the land, generate cash flow to pay off mortgage faster.
2) increase the value of the property itself
3) San Jose is one of the most ADU friendly cities in California. The city streamlined the ADU permit process with increasingly relaxed rules now. One of the only cities that doesn't require owner occupancy. More here: https://abc7news.com/society/s...

How did you find this deal and how did you negotiate it?

Hired the architect and contractors and negotiated the contracts myself.
Most important factors when you evaluate a contractor: expertise and experience in building ADU in the specific Bay Area city, quality, speed, price including payment schedule.

How did you finance this deal?

Family and savings by myself. Work with the contractor to figure out payment schedule that works for you!

How did you add value to the deal?

Worked closely with the architect to make sure the floor plan is going to not only attract the best tenants, but also increase resale value.
Picked the final materials myself to make sure everything is appropriate for a rental, but also attractive as a home for the next buyer.

What was the outcome?

15% annual CoC return. $2500 monthly rent over $200,000 investment into the project.

Lessons learned? Challenges?

It's well worth the effort and time! Glad to see it paying off now!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Hiring the right team is the key. I spoke to many lenders, architects, contractors in the process

If you're interested, I finished my ADU project and you can see the 3D visualization of my place here:
https://my.matterport.com/models/hRAxQheq93H?section=media&mediasection=showcase

For those who're interested, I completed my ADU project and you can see the 3D visualization of my place here:
https://my.matterport.com/models/hRAxQheq93H?section=media&mediasection=showcase