All Forum Posts by: Rick Albert

There are two reasons why a property hasn't sold: it's either the agent or the price. If you feel the agent is doing everything possible, then it has to be the price. 

Miami is seeing a slow down, but that doesn't mean properties won't sell. Heck, I would buy almost any property for $1. If it is fully rented then the numbers have to make sense. It isn't about the comps, it is about the cash flow.

My first house hack was a fixer condo here in Los Angeles. Bought it, fixed it up, and got a roommate. Two years later, my roommate moved out, I lived alone for a quick minute and then got a HELOC and my then fiancé and I bought a second house hack with the FHA 203(k) loan. Rented out the condo for four years and when my tenants moved out I sold it, got a HELOC on my new house hack, and did a 1031 exchange along with a business partner and we bought a fourplex out of state and then on my own bought a triplex where I did the BRRRR strategy. I've been slowly growing since.

A couple of things:

1. Do you have a real estate license? You have to have one to manage other people's rentals.

2. Property management in Los Angeles is typically around 6%-8%. But that doesn't include the cost of finding a tenant (typically 1/2 month to a full month's rent), lease renewals, and some do mark ups on repairs (5%-10%).

3. Here is a more interesting structure. Partner up on the deal where you collect 6% of the rents and 6% equity but don't charge any of the other fees. Then you have partial ownership. 

4. Whether it is family or friends, I always charge the full amount. My time and expertise is valuable and it will take time away from other income producing activities. Conversely I pay full retail for my friends and family's services. It's called supporting each others businesses. 

Have VERY clear expectations and who's responsible for what and provide yet earn trust.

For example, if one person is responsible for finding tenants, then that's their job, stay out of it. If you are responsible for repairs, get them done in a timely manner. I've noticed when partnerships go south is when someone isn't doing their job or is doing their job poorly. 

Outside of BRRRR, what is your strategy? Could you house hack and then buy? If you think about it with about $50K you can buy a $1M asset, which would appreciate dollar wise faster and for more money than out of state (I house hack and invest out of state).

Other than that, you have to be somewhat careful on who you work with. My first BRRRR out of state my PM at the time took me for a ride and I probably overpaid for the work done. Still turned out well but knowing what I know now makes all the difference.

No one will be able to get you a number on this because there are so many factors. Who's doing the work? Granite, quartz, or marble countertops? Shower (tile or prefab) or tub? 

Go to El Monte and there are a bunch of prefab cabinet places. That's where we went for our kitchen. It was less expensive then Home Depot or Lowes. Make sure you pay extra to have them come out and measure so that there are no mistakes. 

The longer you wait to get it permitted, the more it is going to cost. It's not the general cost of construction, but building codes change all the time. I remember when I bought my second house hack, I budgeted $3K for a sewer line for the ADU and as soon as we closed they changed the code to where it needed to be an independent line. Now the cost was $7K.

It will likely come down to who the inspector is. On one hand they are too busy to inspect anything other than what they came to do. This is especially true if they don't walk by the family room. But if you get a brand new inspector, they are known to be meticulous. 

I also don't know where the property is located, but if a tenant wanted to be difficult, they may be able to argue that you let them live in an unpermitted space and now they want all their rent back. It sounds extreme, but not worth the risk. 

I would get it permitted at the same time you do the other work. It will likely require opening up walls to make sure the appropriate beams are there. It may be not a big deal. Bring in an architect and talk to them about it. It's a nominal cost to do the consultation and do it right.

You will have to check with the City and State whether or not you can use the ADUs for a short term rental. In California, they made it clear you CANNOT use ADUs for short term rentals because the intention is to build out affordable housing.

Regarding FHA, as with any owner occupied loan, check with your lender but typically it is all about intention and that you live there for at least one year. After that, you are good to go. Just know that if you have an existing FHA loan on the property, you can't get a second FHA loan. You will have to refinance out of it.

Good luck!

Why not just put the $275K towards another investment property to offset the loss? Now you have two appreciation assets with loan buy downs and tax benefits. Wouldn't that on some level solve your problem and then you can address it later on?

The advantage San Jose has is there isn't any land to keep up with demand. It consistently ranks as one of the hottest markets in the country. 

I wouldn't sell at a loss but keep investing if you can. If you lived in it two of the last five years, profits are still tax free (you do pay back depreciation, etc. so talk to a CPA). So wait it out for a few years and if it becomes vacant, then reassess.

What do you mean by "gaining company experience while waiving GC fees for projects?"

Are you saying how to you work for free in exchange for learning?

First of all, you need to make money. You can be discounted, but one mistake on the job and you are done.

I would first find your niche and go after it. For example I know one successful GC but he only does new builds for developers. He is the go-to builder. He has tighter margins but because the projects are big enough, it still does well.