All Forum Posts by: Sebastian Marroquin

@Danushka Abeyasekera

Every city has slightly different parameters but the cliff notes are that you can add new square footage or convert existing units (ie homes or garages). 

Construction costs are going up for obvious reasons (pandemic reasons): and before costs of building were about $150 to $180 per sq foot and now most contractors that are good are between $225 to $350 per sq foot. 

You need : building plans with a drafter or architect 

Fees with city

And building costs (material and labor) 

We have relationships with all of them in our teams 

Takes between 3 to 6 months for permits and 3 to 5 months for construction (depending on scope of work). Send me a message if you like 

Hmmm that is slightly wrong…. 

You have to check on local ordinances and or the local board of realtors as they will guide what you can and cannot do… but as I understand it, CA has been the state with the most red tape (with NY and other states) and we have been showing properties left and right. 

I think best practices could be: 

1. Let your tenants know in advance and either set a date and window of time when people will come by (say Saturday from 1-2-pm) 

Or ask them if you can do “by appt” showings. We are always extremely respectful and nice to our clients’ tenants. We sold a property in Pasadena last year that 3 other agents could not sell and I think that we sold it mainly bc of that. 

We brought them doughnuts the first time and bought their kids ice create. We explained the process in Spanish to them and were very friendly. They were happy to see us and let buyers in almost any time. 

You could also do a virtual tour or 3D tour and market it with that: then do offers contingent on inspection and then set a date and time for maybe 3 of the best buyers to do their inspections (let everyone know what you are doing) : you as in the Realtor helping you sell. Then the buyer can worry about vacating the property or renting it out. 

We have sold many tenant occupied properties successfully with multiple offers and over asking. Maybe the realtor is not experienced or lazy…. Sorry 

Easy answer: 

If you can build all in: for a price per sq foot lower than what you can buy for…. Then YES all day. 

Now, I am sorry for this… but if you are on this forum asking this question, something tells me that you have not done enough research and you may know what you are getting into. 

Will you say to me… well, that’s exactly what i am doing on here (getting info), well, I would say no. A good talker on here will “help” you get started and will charge you a pretty penny. 

There are a lot of good people on here with out a doubt, but you have to know what you are talking about, what questions to ask, etc. 

Getting a loan for construction is intricate (not so much about the actual know how) but also assessing holding costs, permits, zoning, ARV, ROI, etc etc etc

Now, don’t let me stop you… some of you are fast learners! So please go for it. 

My humble suggestion: How about starting with a SFR: if you can successfully build for (all in) : $400k and sell it for $550k and make a $100k profit. Or refinance it and keep it with no money in the deal!! Then you qualify for the 4 unit property (with more money, more experience, etc)

Most people would even start with a fixer condo: then a fixer House, then an addition, then a new construction home and then a 2x or 3x or 4plex. 

Enjoy the journey! 

If it were that easy, savvy investors would only build 4 plexes and not buy already built ones. 

(Then again, anything is possible!) :) 

Sorry if I am repeating… 

Have you consider buying maybe 2 or 3 units in CA: and then building 2 ADU's on them.

This way you can keep the loan as residential- you can maybe even do a primary loan purchase or not depending on your wants and needs. And you have enough capital to buy the property for about $1 million to $1.5 with a 10% to 20% down payment and then build the ADUs : new construction 800 sq ft. Then refinance the property and pull some of your investment cash out or not… 

I just sold a 3 unit property in Pasadena, CA for $1.1 : will help the buyers renovate the 3 units for about $20k each ($60k total) and will help them build the 2 ADUs to make it “5 units” 

1600 sq ft new construction : $350k all in and each will rent for about $2500 (2 bedrooms and 2 baths) 

That’s $5k rents for new : and $1800 x3 for the 3 units : $5,400 

That’s $10,400 rents gross 

Mortgage for the $1.1 is : at 15% DOWN : $165k DP and mortgage payment : $5,500 

Gross profit : $5k (let’s just assume a 50% net) : $2,500 profit 

New Value for home: about $1.5 to $1.8 ($400k/$700k increase) 

Refi for $1.3 (80% of $1.5 ARV)

Mortgage: $7,200 

Rents : $10,500 

Still in the green and you get back your down payment plus 200k (so cash in the deal about $150k) 

A lot of unknowns in this one with the refinance value… but you get the point. 

I have not seen any 5 unit properties in Pasadena selling for less than $1.6 to $1.8. 

This can be done in many cities. Depending on property 

Hello all! I hope you are doing well! 

Excited to do this meet-up that will hopefully be happening many more times in the future. 

I am a Realtor with Keller Williams Realty, an Investor and business owner. The meet-up will be held at our new home that could very easily be a flip, or a BRRRR property. We bought the home for $500k and put $100k into it so far and home is worth about $750k to $775k

We will add an ADU and will rent it this year. These are all things that we will discuss at the meet up. From how we found the home to, how we negotiated the deal, to the renovation process that only took 2 months to the future use of the home!

We welcome all people who want to meet great people, that want to learn how to do this and that want to network with great people. 

Send me a message if you want to attend. 

Sebastian 

@Aldrin Gacuya 

Hey Sebastian,

For those primary homes you put 5% down on, did you have to pay PMI i'm assuming right? I'm actually very local too in the area being in the walnut/db area. I was interested in starting my journey out of state some time this year, but wanted to see your thoughts on starting here in our backyard for investment properties?!

thanks!

(PMI yes: and about $140 per month…. So not a factor) it may be more for some people… but I just did a video on my social media (instagram acct) for this subject and I was shocked to find out that a PMI is only a factor for about 5 years (bc after 5 years of owning the home : the mortgage will be paid down enough and the value (appreciation at 5% average) will go high enough that you can take off the PMI with the lender. Or you can buy a fixer and take it off right away or within 1 to 2 years.

We can talk more about that if you like. 

Sounds like you are making great moves. 

I am actually doing similar things. 

We own 2 properties in Azusa and Claremont, CA. I lived in Pasadena over 30 years and know the area really well! 

The question and dilemma will be about having a team out of state. I will be working on that soon, but not there yet. Having a good team you can trust will make the difference. 

The other item is about leverage. 

When you buy out of state, while a lot cheaper, the down payment will have to be 20% or more since you don’t like there. 

Even at $200k purchase price : that will be $40k plus closing costs (let’s say $50k) plus renovations. Can work of course. 

My train of thought and why we are buying out here is because we are able to go from primary home to primary phone: with 5% down payment. The Claremont home : we put down 5% on $550k and renovated the home with about $100k : 

The home is worth about $750k after only 2 months of Reno. And now we can refinance and pull a portion of the investment out if we want to. 
We will convert the garage to an ADU also in the next 4 to 6 months and will rent it out for $1800 per month, bringing our mortgage down from $2800 to $1k. And our value will go up to about $850k to $900k!

If you are willing to move: buy a home in San Gabriel valley and put down 5% on say… $800k : that’s only $40k or $50k with closing costs. Then convert the garage and move on to the next one when you are ready! 

I would also put an ADU on the SFR you have already and you can probably put 2 ADUs in the duplex (we have for clients that owned 3 units in Pasadena in the past).

Your duplex will gain about $3600 to $4000 per month more with a $200k investment (with the ADUs) : you can’t do those numbers anywhere else. The value on the duplex will climb to about $1.5 or higher depending on the location and condition. 

Then you can refi. And cash out to keep going. Once you are capped out here bc of debt to income or other reasons. Then go out of the state and BRRR.

Our first property is condo in Azusa and we have $200k sitting in equity and only making about $300 per month on it…. So we will wait this and next year since we can avoid paying capital gains for the next 3 years on it: and will be paying attention to the market (I'm a Realtor) : so we could cash out when we sell about $250k and will buy a SFR and put an ADU on it for a net cash flow of about $1k per month and the home will be worth about $1 million after renovation and ADU conversion (will be looking for a fixer in the $550k to $650K range).

Let me know if you want to talk: I’m local 

We recently bought this home in Claremont, CA and we used multiple strategies for this one. 

1. We found it off market 

2. Negotiated $50k back to buyer 

3. Full renovation in progress (to force value) + ADU later

5. 5% down purchase (not all cash) 

We will casually go over some of these items. Come meet some people, get to know us and see what we are doing to the home and what the goal is! 

Please send me a message to RSVP : Sebastian Realtor in San Gabriel Valley 

A lot of people have a fear of dancing in public. Let's take salsa dancing. 

What would you do first if you wanted to learn to dance but were super, extremely scared of it? 

Seriously? 

Probably: 1. Go to the salsa clubs and classes and sit around watching people dance for about 6 months. 

then 2. After that : maybe you meet a couple of people (network) that will push you to dance a little bit (maybe one song every time you go... ) 

Then : you actually pay for the group classes and take lessons (you dance in there but you still do not dance at the dances, or clubs). for another 1 to 2 years. 

Then : you get better and the people in the classes invite you to social dances : where you are next to other people that took the class with you. 

Then you may or may not take private lessons or you may start dancing more often 

2 to 3 years from now - New dancers will ask you for lessons or tips :) 

or 

you could start on day 1 with group classes and once you catch the fundamentals, you get 1 on 1 training and you will be salsa dancing at the clubs in less than 2 months (Guaranteed!) 

Apply this to Real Estate investing 

Find some people that are doing what you want to do: check their reviews, check their credit scores if you can lol , and dip your toe in the water. 

I have meet-ups coming up in LA if you are out here. Just saying :) good luck 

@Karen Gordon : you have to do the math and create your criteria. Some people do their numbers as if this is 5 years later when you move on to the next property: Will the rents cover the full payment or will the property cash flow if and when you rent out all the units? The bank will serve as a "checks and balances also, bc they will take the other rents and use them as income for you to see if the property can sustain itself (with your DTI ratios). You have to decide if paying $1500 per month is good enough for you. Consider that if you don't buy a property like that, you will have to pay rent and it will exceed $1500. So you are way better off lowering your cost of living by buying than renting. You could look at other options: ie SFR + ADU or Duplex etc

For the intended post here... @David Campbell Congrats... but def. got lucky... All of my clients that bought in the last 10 years almost, gained a lot of equity. You can always sustain even a negative $1k per month... but is that the goal. Most of us do not want to add a burden to ourselves on top of our regular expenses. Any one of us that qualifies could go right now and buy a $1 M dollar property that has a $3k negative cash flow.... hoping that the market keeps going up.... who will do it? Not many of us. Will the market correct, probably. By how much... who knows... 

You just have to make sure that you have emergency funds incase something happens, you have to make sure you can afford the home and not over leverage, you can be creative and force equity into the home with renovations, additions and extra units to hedge against a market correction, and we all have to decide if we will own for the short term or long term. I try to buy off market deals or on market under market deals, I buy homes that need renovations, we add square footage and add units (ADUs) and make sure that the property cash flows $500 to $1000 at the end of it all while having 20% or more equity. 

The question becomes, could you buy 5 or 10 + properties that have a negative cash flow? Can you sustain that? Can you sustain the headaches? If you can, Good For you! and you will make $500k gains if you hold these properties over 15 to 30 Years, 99.9% guaranteed. ;) 

 (lastly, who ever is ok with negative cash flow :) I have about 1,000 properties ready to sell you!) Let me know : kidding but serious too