All Forum Posts by: Dan H.

Hi Dan, 

Thank you for bringing this up. I did further research and this zone is very ADU friendly. One set back is that one of the rooms is not permitted. That said, the below information states we should be ok to create either a duplex or JADU, plus future detached ADU. Let me know if there's anything else I might be missing? Thank you!

Refi & Resale: Future refinancing and buyer financing are not an issue as long as you stay ≤4 units. When you go to sell, a buyer could use an FHA, VA, or conventional loan depending on occupancy.

Esteemed colleagues,

I’m facing a tough situation and would appreciate your perspective.

On August 9th, three students (with their parents as guarantors) placed a deposit on my 3-bedroom Victorian near a college campus. As is common here, the prime leasing season is July through mid-August, and once school starts, demand drops off sharply. Accordingly, I removed the unit from the market after their deposit.

Their lease start date was today, August 16, 2025. However, when they arrived with their parents for move-in, they “freaked out.” This is an older Victorian (not a modern apartment), but it is clean, habitable, and up to code. The students had toured it in person before applying. We take pride in maintaining our properties, though of course, they aren’t new construction.

The tenants are now refusing to pay first month’s rent and sent the following notice citing habitability issues under California law (Civil Code §1941.1 and implied warranty of habitability). Their claims include:

• Mold and old food around stove
• Mold on walls
• Blood stains, dead insects, dust throughout
• Dirty stove/microwave, bathroom unsanitary
• Windows unclean with missing/damaged screens
• General filth, unswept floors
• Showerhead replacement needed

They are demanding deep cleaning, mold remediation, replacement of window screens, painting, etc. and state they will withhold rent until this is completed. They’ve also threatened complaints to the local housing authority/code enforcement.

From my perspective:

• The unit was cleaned and is habitable.
• It’s not new, but it was shown in person before application, and the condition hasn’t materially changed since.
• We pride ourselves on keeping units up to code and in good repair.

My concerns:

1. I held the property for them during peak leasing season and may now be stuck with a vacancy.
2. They’re making demands that feel like buyer’s remorse rather than legitimate habitability issues.
3. They are refusing to pay move-in rent, even though they signed a lease and provided a deposit.

Questions for the community:

• How would you handle this?
• Is this a case where I should meet their demands hoping this will not continue , or is it better to cut losses and move on?
• Has anyone dealt with similar “last-minute” habitability disputes where tenants change their minds after committing?

Any input on best practices or legal/strategic next steps would be greatly appreciated.

Very thoughtful and insightful replies, thank you all. We believe we've found a good SFH that we can renovate / split in half to rent out both sides. The plan would be to do this first (live in one unit still), rent out the other and then refinance so we can then pull some more money out to build a new ADU in the back of the house.

As you all alluded to, new investors can be surprised by the many fees. While we know we can afford the mortgage, closing costs, and insurance, the renovations will need to go a slowly since we don't have much capital (and need to make sure to keep some for emergency funds). Do you recommend a budgeting system to easily keep track of monthly fees + construction costs? I know we need to find a CPA that works with real estate investors asap to help with these things as well. All your expertise is so very much appreciated. It's taken us some time to save up enough money to be able to buy our first investment property, so we definitely want to make sure we do it right. 

As far as investing out of state - That is definitely something we're interested in, but since my husband can save us quite a lot of money by working on the house himself (and will have his contracting license very soon), we feel investing at home is the best first step. 

Great points. My most basic thought is that the money is made when you buy not when you sell. And in most cases a quality neighborhood is worth the premium. 

Hi all,
First time poster, long time listener of the various BP pods. 

I own a 2/1 condo in unincorporated Jeffco just outside of Golden, CO proper. Have had it for a year, and bought it to occupy with my fiancée before upgrading to an SFH.

Plan was to hang onto the condo with a tenant in it and hold for small cashflow and appreciation due to the desirability of Golden (we have a golden address and many don’t even realize we aren’t in the city). The average sale price in our zip was nearly $1 million at the time of purchase last year- it’s now down about 9% per Redfin. 

At this time last year-  units in the complex were renting for $1750/1800, which was about the same as my mortgage payment + condo fees. 

Today, similar units are renting as low as $1550-1600, while my mortgage + HOA fee is nearing $1950 monthly.

Obviously , the market has turned south AND the complex has increased monthly fees, along with adding a special assessment. The HOA is extremely incompetent- they only allow cronies of its president onto the board. The fee is $500 monthly for no amenities of any kind (the pool was filled in with concrete in the 1990's). The parking lot is riddled with potholes. The exterior stairways and landings are in very poor shape. abandoned / unregistered cars sit in the parking lot, homeless sometimes camp out, etc.

On top of this, our little sub market is being discovered. New luxury rental buildings have come online, one just broke ground half a mile away, and another is approved and will go up right next door (200 rental units). It is in a “path of progress” as far as being the cheapest area of a very expensive, desirable town. 

Choices are:

A. I paid $259k, and could realistically unload it for $225k today. 

B. Or I could rent it out and negative cash flow at roughly $325/month. 

My concerns: 

There is a real risk of a even higher negative cash flow after the next budget is rubber stamped. The complex also lost FHA status due to it having far more tenant occupied units than owner occupied (they don't official track this, violating their own by-laws).

 Conventional loans are still possible, but harder to get because the master insurance policy on the roof is inadequate.

Finally, reserves are very low.  The building is 50 years old and full of deferred maintenance.  Many owners bought a long time ago and aren’t involved in the management of the community.  

Short term rentals under 30 days aren’t allowed. Some owners appear to try advertising 30 day+ stays on various platforms. 

For a “TLDR”:

Should I keep a condo in a gentrifying area, but in a very troubled complex, and bank on future appreciation? This would lose $325 a month, and probably a lot more after the next budget is ratified. It would likely take years for my value to recover in real $ to the purchase price, let alone higher  

Or should I “rip off the band aid,” and unload a condo that negative cash flows and likely will for the foreseeable future given the state of the Denver market, as well as new, much nicer units being built in the immediate area?    I’d lose about $50k doing this. 

For what it’s worth, an agent thinks I should hang onto it. There are 8-9 other units in the complex for sale currently, all of which have had price cuts or fallen out of contract. 

Thank you for any insights you may have and sorry for being long winded. I felt the nuance of the condo issues were germane to the choice here. 

Hi BP Community!

Long time lurker, first time poster. I’ve appreciated the information this community has shared and hope to tap into the knowledge base to get guidance on leveraging our existing property.

My brother and I own a multifamily rental property that our father transferred to us in 2021. Because he transferred it to us, we are subject to potential capital gains.

Property is 4 units (duplex, house, cottage) with a remaining mortgage of $390K at a great rate (3.5% / 30yr fixed). Property appraised for $2.7M in 2021. Before taking over, our father had kept rents below market in favor of keeping long term tenants. We generate solid cash flow and our cap rate based on FMV is <3%. Property is in ok shape - built before 1990. The duplex and house are decent but I'm worried the cottage may require investment in the near future.

We both live in California, the property is in our name as joint owners. Our experience in real estate has been managing this property ourselves. The property is in Silicon Valley close to tech companies and is in a prime location where there is strong housing demand.

We're exploring the best ways to leverage our property and are especially focused on opportunities that can generate wealth and a one-time ROI. That said, we're also interested in hearing creative ideas—especially if they could provide strong, sustainable cash flow over the long term.

Here are some of scenarios we’ve been contemplating:

Option 1: Develop the land and build 6 (or more) multifamily units. I'm thinking of townhomes 3BR/3Ba ~1500 sqft. We're zoned for that many units at a minimum as I have spoken to the city. I have seen lots of similar size and zoning develop projects like this. We realize this would be a huge undertaking and we would need to bring in a lot of expertise to help lead development. I have spoken to a couple of lenders and it seems our biggest challenge would be bringing ~20% of construction costs to the table as capital. Broad strokes, I believe this scenario has the biggest ROI potential from one project however this will come with big challenges including capital, expertise, and risk.

Option 2: Pursue the same as Option 1 but just entitle the land and sell it / reinvest.

Option 3: Explore subdividing the lot and build individual SFRs? I am not sure about zoning restrictions for something like this. My understanding is SFR construction is less expensive. Would this be any different from Option 1? I am not sure what our financing options are for this scenario.

Option 4: Leverage the equity via HELOC/cash out refi for further real estate investment. I believe we have a lot of leverage here so we could grow the portfolio significantly. I've read about DSCR options and feel like we could easily qualify and bring capital to reinvest elsewhere.

Option 5: Same as Option 4 but house hack a multifamily property for my brother to live in as a primary residence.

I’d love to hear your thoughts on the different ways we could approach this. If anyone is open to connecting, I’d appreciate the chance to talk it through. We don’t feel we are leveraging our situation to its maximum and with so many options, it’s been overwhelming. It would be helpful to get a reality check on what makes the most sense so we can narrow in on a strategy.

Thanks so much for taking the time to write such a thorough and educative response — I really value insight from someone who’s actively operating in the San Diego market.

For context:

• I knew about rent increase limits going in, but didn’t expect to have to drop my rents as much as I did at the start. When I first listed, demand wasn’t strong enough and I wasn’t attracting favorable tenants. On top of that, I started having people break in to squat at night, which pushed me to secure tenants quickly.

• I landed at about 12.5% below my projected rents. Thankfully, the tenants I ended up with have been great — they do STR/MTR rentals themselves (I allow subleasing).

• According to Rentometer, my units are still under market. I’ve also tried the BiggerPockets rent estimator, but the confidence interval was low. If there’s a more reliable local rent comp tool you’d recommend, I’m all ears.

• My $9,300 monthly total is the actual all-in payment, but I round to $10K for analysis to account for property tax increases, landscaping, and now the new trash fee.

• The property is in Grant Hill — not the easiest neighborhood, but it's still pulling STR/MTR demand (budget-conscious visitors to SD, mostly).

• I was also banking on more favorable interest rate cuts along with continued appreciation — both of which didn’t play out as quickly as I expected, throwing off my original projections.

Regarding your question on my underwriting prior to purchase — can you clarify what you mean specifically? I want to make sure I’m understanding/learning fully.

I’m willing to put more capital into the property if it means shortening the negative cash flow period. From your experience:

• Have you seen STR or MTR operators in similar neighborhoods pull enough premium to materially close this kind of gap?

• Any value-add plays short of a full ADU build that have actually penciled out recently?

• Strategies you’ve seen for bridging cash flow in a soft rent market without over-leveraging?

• And if you were in my shoes, would you stay the course, avoid major changes, and just let time do the work?

Really appreciate your perspective — this kind of detailed, reality-based feedback is gold.