All Forum Posts by: Sebastian Marroquin

Most people work in a team initially to get experience and a team that supports them on the back end. You have to assess how much work you did or did not do to get the leads for last year and for this year. If you are getting all the leads, closing the consultation and listing the homes or getting buyers into escrow without their help… then you have to reassess and move along. 

But if they are giving you leases, open house opp. Etc then you need them my friend. 

It doesn’t sound like you need them and you may be fearful in moving solo… don’t be… 

Use 20k from last year’s earnings and a portion of this year’s earnings and go solo. Even if you sell 50% less on your own, you will be building a business and make the same amount of money anyway. I would have a conversation with them and give them a chance to re-negotiate with them… likely they won’t as teams have to stay at around 50/50 to survive. But a TC will charge you $300 per transaction and you could get an assistant for about $24k to $30k per year. Do your numbers, do your assessments, get coaching from Buffini or Tom ferry and make $200k plus this year and moving forward. If you need training : go to Keller WIlliams realty. 

yeah: more experience and education :) just to feel comfortable but maybe that's why you are asking this question and in that case... Good for you! :) 

most homes come in 1 of 3 levels: 

1. Extreme fixer 

2. Livable but needs some upgrades 

3. Renovated 

There are levels between those levels but you get the picture. 

So first you have to make a decision about what properties you will go after? 

Saying you want a fixer and then buying a renovated home is not being firm with what you want. 

Obviously a fixer "should" be less expensive than a renovated home and why you would choose to do so. 

It depends on the market : but a fixer could be 85% to 75% of retail price (ie renovated home is $300k and a fixer would be : $210k (at 70% ) of retail price and depending on condition and market values in that area. 

So when you walk the home : you would make inventory of what's wrong with the home to make it "rent ready" and offer a price that would fit that scenario. 

So if you have 10 items on the list to make it rent ready: based on other rentals in the area. 

Then when you buy the home you would get bids for those 10 items. 

Its not about what you like or want but about what the market wants and what the tenants want. 

Most cases: we would tackle the systems first (hvac, plumbing, electrical, roof etc ). 

If you have the funds for it. But if you don't then you would not be buying that property right :) 

or maybe you buy a mild fixer that is livable where the systems work but have a life of 5 to 10 years : and slowly save for each system and just improve the home cosmetically to make sure you get the highest rents possible. 

what items you ask: again based on other rentals on the market. :) 

hope this helps and as you can see, not as easy as people think but also, the info is out there! 

good luck 

You will never be 100% ready even if you think you are. and at the same time... not that big of a deal. :) 

Biggest suggestion if not already in the 74 comments: 

Have a good cushion of cash and emergency funds. It's all about the money. Imagine buying a 300k property but you have $1 million cash reserves :) pretty easy right... even if the home burns downs in the middle of the process, chances are you will be upset of course but it will be ok. 

Now imagine buying a $500k home and you only have money for a down payment and closing costs. A kid playing outside can break the window and you will collapse in tears. 

So, do most people have $1 m reserves (NOOOO) i get it. 

but if you care buying a mild or heavy fixer: you should have : 

down payment 

Closing costs 

20% or more in reserves on top of your renovation budget. (and some people have 50% to 100% more than the budget for repairs). Things come up all the time. Make sure you buy home warranty when you buy. 

Reserves, reserves, reserves. 

Do a great inspection and don't get emotional about anything you are buying in the escrow process. 

If you have to walk away - do so : better to lose $1k in inspections than buy a bad property. 

I would: 

1. Look for a fixer home in an area you like: buy with 5% down : fix the home and add the ADU:

Refinance and pull some of your investment out. Then you could add sq footage and increase value more and then choose to refinance again or not... up to you. of course, look at the rates and do it when beneficial. Start with about 1000 to 1200 sq ft (ADU about 400 sq ft garage) and add 500 to 700 sq ft master. for about $200 per sq ft and the value added will be around $400 to $700 per sq ft (depending on location and prices). Can't beat that.

2. Buy a home with a bigger lot: fixer or not... and I have a company that will help you divide the lot and build a home on it with their funds. (say the area is selling 1200 sq ft for $800k ) so when you divide the back of the lot and build a home: you will be around $300k for 1000 sq ft 3 bed 2 bath open concept home, and sell that for about $650k to $700k (you will share profit with the company 80/20)  and net around $150k to $200k 

So your $800k home will effectively be ($800k minus $200k : or $600k) and you can use the profit to improve the main front home: add ADU and make it bigger if need be and if the market supports a higher value. Or just the ADU and once you rent it out you will net about $1k per month. and move on to the next purchase.

3. You could buy a fixer 2 unit or 3 or 4 unit property : 5% down and still add ADUs if city permits it. A lot of counties allow it on multi unit properties. Cash flow and move on the next one. 

(if you don't have much experience buying or building. Maybe your first move could be to buy an SFR and then later add the ADU. Things will always come up and over extending yourself could be stressful on both you and your GF).

* I do get why other realtors on here are asking you to lean on your current realtors : bc if you bring these strategies to them (knowing that they did not proposed anything like this) they won't have the teams to suggest to you (ie contractors, architects, drafters, and navigating the permit process with building and safety with the city). 

Each one of the people mentioned for the teams could F***** up your first purchase. So be careful who you work with. 

I have worked with many investors flipping property and buying rental property (10 years of experience) and we had some set backs with our first purchase and we did buy a fixer condo lol 

so, theory will always be different from practice. We learned a lot from buying, renovating and renting that condo. and Now we moved to a SFH: renovated everything except foundation and framing and adding an ADU.

After this one: we will buy another SFH or multi unit (kinda using the stack method): I think we are ready now financially and mentally for a bigger property. :)

Good luck 

check on legalities and tax implications to any of the below: 

But I have seen people. 

rent out their primary home + ADU most lenders won't take the rental income from an ADU but they will take 75% (check on the number) of the rental amount. Rents in LA are super high and they will check market rents but if your mortgage is $2500 you could probably rent it out for $3500 and take the 75% as income to qualify for the next one.

Coupled with : reporting more income from the business (you will have to pay more in taxes, sure) but paying an extra 25k in taxes could enable you to qualify for much more and instead of buying for $200k out of state you could buy another primary home at 5% down payment (instead of 20% out of state) and buy out here in LA county. 

200k out of state: 20% down : $40k 

600k here: 5% down : $30k (with better appreciation and cash flow from ADU)

You could buy in an area out here under 600k and again, put in an ADU and be in a better position. Or buy a duplex, triplex or Quad and again, use the extra unit rents as income towards an approval.

Use a partner you can trust (have a very detail contract between you all) and use their income and your money to purchase. They can be on the loan (or both on the loan) and you on title or both on title. How ever you want to negotiate. maybe a 80/20% ownership or own for 5 years as you raise your income and then refi to get them out and pay them out what ever you negotiated. 

Easier said than done.... but do-able 

Sorry people: about the meet up: I have to cancel it. I didn't realize my bday is that day...  :) 

Ill post for another meetup date soon. 

Hello all. 

We just went through this with a client (well, something similar) 

The home was zoned (single family fyi) 

but they had a second unit in the garage. I have a great relationship with the lender and they have a good relationship with the appraisers. So they need the stove to be removed from the unit and the gas to be capped to not count it. (situation is diff. of course). 

So, a lot of realtors that don't know better, market a property as having an ADU just because the unit is there when in fact permits were never issued.

The fact that you can enter the ADU from the home tells me that it may ("may") be illegal and not permitted.

So the lender may visually count it as a second unit bc of the zoning, but you could maybe take out the second kitchen and get lending as an SFR and then put the kitchen back in after the you buy it assuming that the rate will be way better than the other way.

You have to do the math and see if it makes sense doing that, how much does it cost to take out the kitchen and then put it back and of course, find out first if doing so, will help you or not? 

(for future reference : in the future it would be best to permit it as a 2 unit property and not a home + ADU. In most cases, 2 units will have more value than home+ ADU. The zoning is there already so why not, the set back could be that 2 unit will imply more parking and an ADU won't.

I would: 

1. Go to the city and see what the public records and permit history says (with building and safety). 

if the property does not have permits for the ADU.

2. I would try to negotiate a better deal as you may incur fees with building and safety and construction costs if the unit is not up to code. 

3. Get an inspection and contractor out there to see if plumbing, electrical, Hvac, roof etc is up to code. 

and ask the city: what do I have to do to make it a 2 unit property legally or home + ADU.

You can make the final decision about what you want to do, but having this info will help you one way or another. 

Talk to different lenders also. Some have better relationships with underwriters, and their investors and appraisers. (I'm not talking about doing anything illegal at all... Better communication with them is just that ) :) 

(sorry if I have typos above. I like to type fast :) ) 

@Jonathon Hunt 

I would start with Realtors that are good and architects : they both should have good people they work with. 

If you need a good realtor out there let me know: my network of Realtors are everywhere :) 

A lot of great comments and advice on here. 

A lot of or most appraisers i work with that also work for the banks with purchases or refinances do “table top appraisals” 

I would pay one of them in your town: see any good realtor that is in escrow in your town for their listing or buyers and they likely had an appraiser come out recently (call them and ask them for that phone number). 

Pay them about $300 to $400 to do a table top app. For either a 3plex or a single family home. They will give you a good indication of what each scenario would be worth and if it would be a good ROI for you to do anything.

Here in CA we do have several cities where I have seen a duplex with 1600 sq ft sell for about $1.2 and a SFR with also 1600 sq ft sell for $1.5 (trends right now show that buyers would rather have a home that is 1600 sq ft with a detached garage they can convert into the second unit for rental purposes or for family to move into). So, i get your point. I think you have to know your area and the comps for each one of those options. Lastly, do not compare a single fam. Home that is renovated and looks great at $150 per Sq foot to a fixer duplex or triplex. Not the same. Good luck

@Jonathon Hunt word of mouth: interviewing multiple contractors and always having a second and third option. I put the teams together and the clients come in and plug into my system. They do have to hire each team member and the contract is between them, but I do bring the team in for them. If I were you, I would ask around or go on yelp and see who has the best reviews then I would ask them how much they charge per sq foot and then I would go from there. (I think that at around 200$ to $250 per square foot, you should get quality work. Anything less than that, and they either do not know how to bid right or they will not finish your project.