All Forum Posts by: Brad S.

....Oh, and as an Appraiser, you would get ZERO value for it in my valuation, as it may not be legally permissible (unpermitted, etc)  in it's current state. It may have value to someone, but not to me in my valuation.

Remember, some things are more liability than their value. In RE some thing is not always better than no-thing. Some properties have more liability than the value of the property. Not saying this property is one of those, but, just an FYI.

Ok, this is an old thread, so maybe it is too late, but:

#1) Call up your prospective or the seller's current insurance company/agent and ask them what their take is on it. My guess is that the tiny house is not covered. In other words, in a loss event (fire damage, loss of life, etc), the insurance company would most likely not cover it and you, or the entity that owns it, could be held 100% responsible for damages, negligence, etc. 

Then, the question is: Why would you put yourself at risk for being sued for a lot, or everything you or your entity owns. Decide what kind of business you want to run and if the risk is worth it.

#2) Call up the local planning/building/zoning department and anonymously and hypothetically explain the situation to them and ask what the ramifications are if they found out about a similar unpermitted structure, etc. That will give you an idea of part of the risk you are taking on by owning the property. 

#3) Decide if the risks are worth it to you, but make an informed decision.

#4) If you have already purchased the property - do #1) & #2) anyway, so you can now understand the liability/risk you currently have. Then you can decide to do something about it, or not, but, again, it will be an informed decision. Ignorance is NOT a legal defense! (Disclaimer-I am not an attorney and this is not intended as legal advice or any other advice).

#5) If this is indeed in CA, there is no way I would do this, but that's me. You do you!  :P

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.  :)