All Forum Posts by: Rick Albert

A couple of things:

Check ADU laws. In California they cannot be used as short term rentals. The purpose of them is to create a larger housing supply.

Floorplans are important. I would ask agents for floorplans if they aren't already posted online. This way you can get a sense of what you can and cannot do before seeing it.

Often times these communities are tract homes. Once you see a floorplan you like, maybe set radius criteria for similar homes. Once you have seen one, you have seen them all. 

The short answer is likely yes through what's called the Ellis Act.

However, you will have to pay relocation fees. You need to call LAHD to get clear. And even then tenants get free legal services here in Los Angeles so you have to make sure that you do this right.

In an ideal situation, you would buy with one of the units vacant. I would never advise my client to buy with tenants in place with the intention to get them out unless they have the cash and experience. This is not something you should be doing as a first time home buyer. I know this because I manage a So Cal landlords group of almost 1,100 members. I know the horror stories.

If you are working with an agent that advises otherwise, you need to find another Realtor. I know that sounds aggressive but I cannot stress it enough.

 For example do you have a layout of what can be built and has it been approved by the City/County? This saves time and money for the next investor. 

I started with house hacking a fixer condo. Fixed it up, rented another room, refinanced a few times to lower the payments. Then I took out a HELOC to buy the second house hack and did an FHA 203(k) loan to remodel and expand the main house and convert the garage into an ADU. Lived in the ADU until we got our finances in order and then moved into the main house. Then sold the condo and did a HELOC on my new house hacked and did a BRRR out of state, where I made an extra $60K on top of money actually out of my pocket and bought another property with a 50/50 split with a business partner.

You will have to be careful with some stories because times were very different over the last decade. When I bought my condo in 2015, it was towards the bottom of the market for condos. Then when I sold in 2022, it was before rates really took a jump. 

If I were to start over, I would have had to do it differently because I wouldn't have been able to bank on the appreciation like I did before.

If they are that rare then what are the odds of finding land/tear downs where you can legally created 2-4 units? That is another hurdle to consider. If it isn't realistic, then pivot. 

In some states Accessory Dwelling Units are allowed through converting a garage. This gives you single family home options and building out the second unit. 

This is a good example of why flippers and builders are focusing on the higher end real estate. The cost of rehab is almost the same, whether it is in Pasadena or Pacoima. Cost of plumbing, drywall, electrical, etc. is the same. The difference is the land and finishes. However the land value is passed on in the overall value and the finishes is only a small percentage higher than Home Depot quality.

Where I am seeing some flippers screw up is the quality of the work is horrible and clients are noticing. I have clients who are interested in buying a flipped property but the investor didn't pull permits and added a bathroom. It has been sitting on the market and now my clients might be thinking of lowballing them. Had they spent a few thousand dollars on permits, then they would have likely gotten closer to their asking price. 

There are two reasons why a property doesn't sell: Price and Marketing (or more commonly the agent).

If you feel like you have been marketing the property well, then it is the price.

Land is extremely difficult to sell. This is especially true if there aren't utilities nearby and frankly in the middle of nowhere. 

It would be interesting if you had approved plans to go with the property and the utilities were ready to go. That would increase the desirability.

Building from scratch is much more complicated than I think many people say.

Some builders/contractors don't give you a full picture. If you buy vacant land, where are the utilities? Septic tank versus public sewer? Public electricity or solar panels?

It will likely be easier to do the FHA 203(k) loan on an existing structure. Keep in mind if you remodel versus new construction, there are likely different building codes.

You need to check local laws to see what is and isn't allowed. Especially if it is subject to California Rent Control.

Generally speaking, you can have a conversation with them about leaving but if they are out by 7/15/24 will it make that much of a difference? You know they have to leave because of the new build, why rock the boat.

If everyone is on good terms, beginning of June, start advertising it and showing it. That way the pressure is on and if you locked in a new tenant for July, you have more grounds for them leaving. 

In an ideal world, you should play nice. If they have been good to you, you should be good to them.

On Zillow they show who the listing agent is.