All Forum Posts by: Brad S.

Here's what I found about SB9 and tenants in the past 3 years.

"Benefits homeowners NOT institutional investors. Recent amendments require a local agency to impose an owner occupancy requirement as a condition of a homeowner receiving a ministerial lot split. This bill also prohibits the development of small subdivisions and prohibits ministerial lot splits on adjacent parcels by the same individual to prevent investor speculation. In fact, allowing for more neighborhood scale housing in California’s communities actually curbs the market power of institutional investors. SB 9 prevents profiteers from evicting or displacing tenants by excluding properties where a tenant has resided in the past three years."

from  SB 9: The California HOME Act | Focus 

and here is info about RSO and properties built prior to 1978

"Q12. May SB 9 be used for properties with units covered by the City’s Rent
Stabilization Ordinance (RSO)?
The City’s RSO covers properties with two units or more where at least one of the units
was built prior to October 1, 1978. This includes properties with a single-family residence
built prior to this date and a second dwelling unit (e.g., main dwelling, ADU, or JADU).
Please consult LAHD’s webpage and associated FAQ on this topic. Demolishing or
withdrawing a unit covered by the RSO requires an Ellis Act withdrawal. RSO units are
considered withdrawn from the housing market if they are demolished or if the two units
are split into two one-unit parcels due to a subdivision. Properties with only one unit on a
parcel are not subject to the RSO.
A property owner may not seek a permit for a SB 9 Two Unit Development during the 15-
year period after RSO units have been demolished or withdrawn from the rental housing
market (Ellis Act). Therefore, an Ellis Act withdrawal will disqualify a site from being
eligible for a SB 9 Two Unit Development for a 15-year period from the date of withdrawal.
A property owner who has completed an Ellis Act withdrawal at their site may pursue an
SB 9 Urban Lot Split only if the units withdrawn from the RSO (via an Ellis Act withdrawal)
are not demolished or altered.

They have a small matrix showing scenarios and SB9 eligibility. Check it out here -
SB9FAQ2.7l.pdf (lacity.org)

I am not an attorney or cpa and as always, don't ever blindly follow any advice you get on a public forum. But, I did work for the LA County Assessor a lifetime ago and know a little about prop 13 and less about the newer props passed. 

But, there was that pesky lil prop passed last year, Prop 19, which severely limited the parent to child transfer property tax reassessment exclusion. My understanding is, that a parent to child tfr or grandparent to grandchildren tfr (only if all parents of those grandchildren are deceased), or inheritance from parent, may not trigger a reassessment as long as the child/grandchild is using the property as their primary residence. 

So, if you plan on using it as your primary residence you may be able to "inherit" the low property tax base value, but if/when you stop using it as your primary residence, it can be reassessed to current market value. So, the property tax concern may not be as much of an issue in your decision, if you are not planning on using it as your primary.

And, in my non-CPA experience, it is better to inherit the stepped-up tax basis on the property when the family member passes. That could be the difference of 100k's+ in taxable gains and if you aren't living in the property when it tfrs to you, it can get reassessed anyway!

Quote from @Brandon Jack Reneau:

@Brad S. It will be a commercial property. That will only be used for RV/Boat self storage. 

I have 4 acres. Im looking to improve one acre with outdoor & covered parking (in phase 1). 

I'm wondering if the improvements + cash flow will add enough value for me to refinance and start developing the other 3 acres. 

@Brandon Jack Reneau ok, got it, that makes sense.

So, I am not familiar with the area or the local market there, but I am an appraiser and have done commercial work. But, I have never specifically done that type of assignment before. But, basically, you need to estimate what the cap rate of that type of commercial property is and then the income you can generate (NOI-net operating income), to calculate the estimated value. If you are a commercial realtor in that area, you may have an idea of what the cap rate is, or you could ask a few local commercial realtors or appraisers.

But, generally, yes, the income you can generate on the commercial property should be utilized to estimate the property value.

Actually, now that I think about it a little more, you may also want to contact a commercial lender now and ask their opinion, that may give you some more direct insight. They may have dealt with similar properties in the past.

I'm sure you knew some of that already, but hopefully it was somewhat helpful.

Hey @Brandon Jack Reneau, I'm not 100% clear on what you're asking or doing.

Is this a commercial property you are developing into a boat/RV storage yard? ..or is this a sfr you are building a boat/rv storage garage?

My guess is you are talking about a residential property. If that is the case, most likely your boat/RV storage facility will considered an over-improvement, unless that is a common amenity in the area. And as an over-improvement, it typically has an only incremental positive affect on value and appeal, if any. For residential property, income is not typically not a significant factor in the valuation, since residential properties are typically purchased for owner use, not for income producing potential. But, again, I am unsure of exactly what the situation is.

A couple state concerns below and then there are local issues, like local rent control, etc, depending on the city.

*  CA Assembly Bill 1482 - CA rent cap law with other provisions, effective January 1, 2020

*  Proposed Senate Bill 584 - 15% tax on short term rentals

And there are and have been a slew of other bills that have been and continue to be proposed, and for some, it is just a matter of time before they get passed.

Search the above bills for more detailed info

First of all, it seems that they have only "consulted" with an attorney and most likely, someone they know. This letter says nothing about retaining the attorney's services to demand anything, etc. It is more of a "scare" letter. It seems pretty unneighborly for them to send this attorney letter, without first contacting you to discuss the situation as friendly neighbors. 

My brief review of CA law (I am not an attorney), seems to suggest this is only a nuisance to the neighbor, and most likely, hasn't caused any actual damages. They can utilize their "self-help" rights and have the nuisance branches trimmed and cleaned up, which they have, or they could sue, alleging the trees overhanging branches are infringing on their right to quiet enjoyment of their property. It seems like a stupid suit for this simple issue, but some people may do it anyway. It appears that they may not be entitled to their attorney's fees being reimbursed if they win, so it may not be wise for them to sue. 

I'd like to see this court case in CA, talking about "vermin and creatures" your tree is attracting to your neighbors property! I mean this is LA County, where not even real crimes get prosecuted, I'd doubt a judge would look at this as a real issue.

But, to me it would depend on the tree and how substantial it is. Does it provide shade, is it aesthetically pleasing to your yard, etc how much is overhanging on the neighbors property - is it easy enough just to have the gardner do a once over major trim and then keep it maintained monthly, etc. 

If you don't want it there and don't want to continue to deal with your "wonderfuL" neighbor, then I would maybe remove it. But, I think I would first knock on their door and try and have a friendly conversation with them about it, to try and resolve things "neighborly."

Quote from @Joseph Brown:

Quote from @Brad S.:

Quote from @Joseph Brown:

I've been getting quotes in Westchester between $200,000 - $250,000 is the price range. They said cheaper if I convert my garage.

What size ADU are those $200k-$250k quotes for? And is that for everything, including soft costs (permits, etc) or just the building costs?

400 sq ft. 200k -$250k was a rough estimate to build a new structure, everything included. The breakdown had the permits and plans roughly at 15k.

Thank you for clarifying. That's sounds a little steep!  But, that's encouraging, since I am pretty sure I'm gonna be able to get building costs much lower than that. I am in the planning stage right now for building a 460sf art studio. I'll see what that comes out to be, but should be far below half of those quotes.

Hey @Sebastian Marroquin

I'd be interested. It helps me keep my head in the game.  :)

1) Determine market CR
Find more duplex comps and calculate their CR, then reconcile those cap rates to estimate the market CR

2) Analyze the deal
Estimate the NOI (net annual operating income-after expenses) of your Subject duplex. This may include a proforma (projected income) from any value-adds you can do or raising rents, etc. Then you take the NOI and divide by your estimate market cap rate to get the estimated value.
Example:
market cap rate = 7%
Estimated NOI (annual) =$28,000
Value = $28,000/7% (or 0.07) = $400,000

Now, you can compare the value/s with the offer price of the Subject. So, you may decide that you want to purchase the Duplex for $300k and put $30k into, in order to raise the rents (proforma) to get to the $28k NOI and thereby raising the value to $400k.

So, basically, you are estimating the market CR, then you determine the income possibilities of the Subject, and then use the market CR to determine the deal potential.

3) MOST IMPORTANTLY
Cap rates are typically not that useful for 1-4 unit properties. 1-4's are typically valued by sales comps (comparables), not the income approach. Too much variability and motivation differences in 1-4 properties, to be useful. 

Hope that's helpful!

Quote from @Eliott Elias:

Quote from @Account Closed:

Quote from @Eliott Elias:

Quote from @Account Closed:

Quote from @Doug Fluckiger:

My wife and I own a couple of STRs and would like to get into the fix & flip game, but we need to start small. We're looking for a house ≤ $100k with an ARV of ≥$160k, off-market, mostly cosmetic rehab, B or better neighborhood. Can be older, # of BRs & BAs doesn't matter to us. We've been looking in the Midwest but are open to anywhere. Do you have suggestions for markets for this kind of deal?

For a fix & flip you have to have available buyers or you get stuck with the property and you end up trying to rent it. Small poor towns are not a good choice. Don't get sucked into FOMO (Fear of missing out). 

There are buyers for any property, as long as the price is right.

Your Comment: There are buyers for any property, as long as the price is right.

That's a "nonsense" answer.
I think he intends to make a profit.

 All real estate has value, buying right applies to any case.

OK, i'll be nice...
Your inexperience and naivety are showing. 

You were half right with the first part - "All real estate has value" ....and sometimes that value is negative. And more food for thought...."value" extends far beyond money or cost.

The second part of your bot's response is just off the rails.