All Forum Posts by: Matthew Forrest

I also vote for two homes, and two ADUs!

@Dennis Maynard @Jonathan Taylor

To clarify what I meant by "values will be closer to duplexes minus the financing benefits of duplexes counting the rent as income," I think a SFH with an ADU with be the same from an income perspective to an investor with a duplex (two units only) or someone who wants to house hack and be able to afford more house. Put more simply, right now SFH + ADU is valued more closely to a SFH than to a duplex, but I think it'll move towards the duplex valuation.

@Jonathan Taylor I have had my property appraised twice post ADU (not garage conversion) and the appraisals came in $40,000 apart so the value of the ADU is definitely subjective based on the appraiser that you get. One appraiser compared my property + ADU to a local property + garage workshop. I received $20,000 in valve for the ADU on that appraisal. The second appraiser decided that he couldn't find any good comps, but used his judgement to give valve to the ADU, which resulted in the higher appraisal.

I don't think that ADUs should be valued based on income or square footage, but I believe that ADUs definitely have more valve than they're getting right now. Personally, I haven't seen and SFHs with ADUs sell in my area so I would be interested to see one of those come though. In the long run, the value will be based on comps (assuming we build enough of them) and values will be closer to duplexes minus the financing benefits of duplexes counting the rent as income.

@Ray Martinez I do not have any LLCs or other entities and I am able to write off the expenses associated with my real estate expenses.

@Ray Martinez
The biggest knock on electric is probably the stove top, but anyone who prefers gas stove tops probably hasn't tried an induction stove top. Check them out! I vote for all electric for the following reasons: 

-Electric appliances and gas appliances are comparable cost wise, If you're building new, you're already installing a new electric drop, meter, panel and wiring throughout the house so incremental circuits should add much cost vs extending your existing gas line and also getting a gas meter

-Electric appliances are more energy efficient (although they can sometimes cost more to operate

-Electric is more safe than gas in the case of an earthquake

-Electric is the future

-CA is planning on phasing out gas

@Erik Luna I love Torrance (City of Torrance). Let's connect and talk the market!

As far as your calculation, I think the purchase price is pretty low and that the GRM should be higher. If you already have the property under contract then that's awesome, teach me your ways! It looks like someone bought the property in 2014 and did the value add already so there isn't much room to move rents, which is good from a rent control perspective. Also, I agree with @Richard Weldin, the numbers look good in the calculator, but I don't like the feel off the area. I think City of Torrance is worth the premium and has more upside in terms of appreciation. 

@Maxwell Ventura Sad that this was too far an I couldn't make it! Have you considered live streaming the event as well?

I'm glad that there are other opinions other there! That's what makes markets and helps prevent bubbles. My statement around money being free was hyperbole and I apologize if that wasn't clear. 2008 was obviously full of bad decision in hindsight, but as you mentioned we plugged some of the gaps that made the situation particularly precarious.

My overall sentiment is not in support of over leveraging! The barriers to entry in real estate are pretty high so reckless speculation is much less common than it is in penny stocks and crpyto. From what I've seen analysis paralysis is a bigger problem for new investors so they don't need to be any more scared than they already are. I believe education mitigates both risk and fear and there is no better way to learn than to do.

@Shawna Hunter For simplicity's sake I am going to say larger room.

On the other hand balconies are a nice an valuable feature especially in CA. It depends on the size of the room. If its already a sizable room, the balcony. If not, then more space. I lived in a 8x10' room with a balcony, I would have preferred more interior space. 

@Jacob Poppe Cool post. I am in my late twenties and own a house with an ADU that I currently live in and rent out (rooms in the main house and the ADU to one guy). I spent my early and mid twenties as the guys renting by the room and was always the guy coordinating people going in and out. With a little bit of bias, I instinctually would say the best option is #1. Its unfortunate to get kicks out of where you live and I doubt those guys will be able to find a place they like as much as yours. At the same time, I assume this option benefits you most as well. As you mentioned, this option would be the least amount of effort. Also, it sounds like this requires zero capex or repairs, which will serve your returns well in the long term as long as you're not allowing unmitigated permanent damage. The only scenario I would go with option #2 is if the repairs & improvements were justified by an increase in rent. Just throwing a number out for paint, floors and AC, to me that sounds like $20,000. Personally I like to see a 20-25% return on that spend, so if you can get an extra $400/mo, I would go for it.

As a side note, if you sign a lease with option #2 or #3, make sure to include some language about your plan to build the ADU. The loss of space as well as the disruption can be difficult to the Tennant when its time to build. Also, unless a paved front yard is the norm for the neighborhood or its impossible for you to attract tenants without providing parking, I wouldn't do it. Paved yards are ugly and might make it even harder to get tenants despite the added parking.

TLDR, thanks for being an awesome landlord. Sounds like you care about the wants of your prospective tenants, but you don't need to sacrifice your financial performance for them. Find tenants that fit your lifestyle and financial goals.