All Forum Posts by: Dan Sundberg

@Hannah Joy - Sounds like a great project! I'm nearing the final phases of converting a ~275 sq ft garage in Sacramento to a Studio space and should have a full post-operation breakdown of all the costs soon. But rough costs are below. 

There were 3 big learning points. 

First is appreciating how much of an impact the building dept has on how easy/hard the project will be. Sac is pushing pretty hard for ADU development, so we had a surprisingly easy time getting the whole thing pushed through. Some people in the next city/county over (West Sacramento) are have a much tougher time.

The second was the foundation, which was an unfortunate surprise. The house is ~100 years old, and the foundation was a simple slab with no footer. The city inspector was flexible with our solution, but we wound up digging a trench around the whole perimeter of the garage and filling in 16"x20"x70' of concrete to add a footer...

The last one was drainage. The old garage was never well designed for drainage in the first place, and after the record rain last Fall we discovered it was the low point in the yard and water was coming into the garage. We solved it by regrading and adding a somewhat elaborate drainage system when we dug out the foundation/footer. 

Costs: 

• Prep (permitting, design) - $4,500
• Concrete work (front/rear patio, new footer, drainage) - $9,000
• Plumbing (sewer/supply, rough, finish) - $8,000
• Electrical (separate meter, panel, rough, finish) - $7,500
• Rough work (demo, framing, insulation, drywall, doors/windows) - $20,000
• Finish work (flooring, kitchen, bath, paint) - $20,000
• Misc appliances - $6,500
• Total - $75,000
• This was, of course, over budget. But it will still be a pretty good cash flow. Curious to know what your numbers are too!

Hey @Tim Kunz - the project isn't finished yet, I accidentally submitted this post, lol. I'll do a more thorough one when it's all done, but here are some shots of the garage right now. If you're planning to be around the Oak Park/Medcenter area any time in the near future shoot me a message and I can show you the place in person. The permitting process was actually fairly painless. It took a couple months all together and the city accepted it on the first go with no revisions at all. Happy to talk through this in much more detail too if you're interested. 

Hey there - I'll pitch in some thoughts on this. I think you might have your answer with your comment that you would rather have less profit and more peace of mind. That is a big part of that trade off - risk/reward. Interest only certainly gives you more cash flow and if you are planning to be really aggressive with growth (which it sounds like that's part of your plan) then maybe doing interest only makes sense. It also leaves you more exposed long-term if there are any value drops. But you could also start with non- interest only until you get comfortable, then dabble in different loan types on the next homes. 

I personally like the buffer debt paydown creates for my properties, even buying in a high appreciation market. It also has certain tax advantages here as well. 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $605,000
Cash invested: $120,000

Rehabbed the main house, and converted a detached garage to an ADU to rent out separately.

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

This allowed us to create a cash flowing property in a high appreciation market. Also, Sacramento is in an intense housing shortage, so anything to add additional housing to the area is of interest to me.

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

MLS

How did you finance this deal?

Personal savings

How did you add value to the deal?

Added a bedroom in the main house, new flooring, and cosmetic refreshes in the main house. New plumbing and electrical. Converted 275 sq ft garage into studio apartment.

Hi Susie - congrats on the potential high appraisal! That speaks really well for how well executed the project was. I think your answer is going to depend on your goals. If you want to really dive in and do more deals, then pull out the money so long as you can afford the extra monthly. If that cash flow is super important to you and this was a sort of one off passive deal, then probably leave the money in. 

My thinking on this is if you can pull out an extra $32,000 from that house that's basically another down payment for the price range of home you're in. The value of the first deal is to get you to your second deal, not to get rich. So if you can use your first deal to get you to your 2nd and 3rd...big win...

Otherwise that $32k would just be sitting in the house earning you $150/mo or 5% annual returns...based on this first project, I'd bet you could earn more than 5% with that money by BRRRRing another house... 

Like many of the other folks who have posted here, I think the answer depends on your experience level. Sounds like a high risk high reward type project. Pulling off a multi-family development in LA near campus could be super profitable, but will probably take a few years and an intense amount of money. 

If you are a relatively new investor, and assuming you are 1 of the 8 inheritors, it would be better in my opinion to sell the house, and take your $80k - $100k as a seed fund to invest in single family and small multi-family deals. This way you could get your money working much faster and start doing projects that will let you build experience to take on progressively larger projects. 

Sounds like a solid plan. Good luck!

Hi @Gabe T. and @Eduardo Aguilar - also following this as well. Investor and Realtor here in Sac and very much on the look out for investor friendly contractor for current and upcoming projects. Can you DM me the info for your contacts too? 

Thanks!

If that's the case then there are no restrictions. Can you just have them pay you rent and let them live in the house until they get the other one fixed up? 

Hi Yosary - welcome to BP and congrats on getting started! Sounds like you have your market picked out, which is helpful. Your two best next steps would likely be to consume as much education on the topic as you can get your hands on, and start networking. Listen to podcasts, watch YouTube, read posts, and maybe buy a book or two. Second, see if there is a local Real Estate Investors group, either through BP or meetup (or both!) and go and start talking to people to try and learn as much as you can. A great way to break into investing too is to find someone experienced who will let you watch over their shoulder. If you can contribute value to them, you may be able to find someone to mentor you in that way. 

Regarding the cheap houses website...when you find it let me know. I don't think any legit ones have existed in a long time, unless you have a lot of cash...mostly the way you find houses now is relationships and hard work.