All Forum Posts by: Sebastian Marroquin

Up-side: you can get your capital back and buy another property and do it again. 

Down -side: mortgage will go up (maybe depending on interest rate) , re-start the time on the loan (i.e. 30 years). Pay more taxes as it gets re-assessed. 

A lot of investors do this: they buy, renovate, refinance it- live in it for some time and move on... rent it out. 

Depends on what you will do with the home and what you will do with the money. 

talk to a 1031 accommodator also: 

That person will tell you if is a yay or nay. 

if you are in CA let me know: I have the best person for it. 

If not- I'm sure a realtor in your city can guide you to a good one. 

My humble suggestion: 

Do not try to get the info by yourself... why do so if you don't have to. 

Simply call the city (google : building and safety: even if you don't know what dept. to start with ... they will guide you to the 'next dept. that can answer some questions: then ask that dept. (what other dept. do you suggest i talk to next: and ask them to transfer you). 

but since we are here :) 

1. Call building dept. : ask them your questions 

2. Call zoning dept (within building and safety) : they will look up your address and will let you know what you can do and cannot do. Sometimes they won't give you what you need : so ask them for your specific zoning - they will give it to you. 

Then ask them what can I build? they will tell you. 

Then let them know what structures you have and ask them if you can build an ADU or a JR ADU? They will tell you.

Then ask to speak to fire dept. for the same reason: and then to public works: they will tell you. 

sometimes they will say: in theory you could do what you say you want to do, but you need to submit a formal request in planning and building with a drafter and or architect: 

at that point you will have to decide if its cost effective to do so. Let me know: I have some people that can help! 

PM me your address and I can look it up if you like . 

I guess I can look it up with your name... but I'll let you decide if you want to go that route :) 

Also let me know if you need help with the construction side: I have some great people for the full project from A to Z! 

Let me know if you have any questions 

Sebastian 

I'm with @Ujwal Velagapudi on this one. 

You have much more life experience than I do for sure. And a lot of moving parts for you and your 2 friends. I know that it's easy to think like this when life happens and you have something catastrophic happen to you or someone you know and for that reason, I would say, sit down and really think about it and give it some time for 'it' to settled in. The worst time to make a decision is when going through fear, stress or uncertainty. The fact that you posted on here tells me that you are thinking about it and willing to get other perspectives. 

I think we all think about this one way or another. I've had the money to buy my new Tesla for about 5 years now...  :) and haven't bc I want to do other things with that money.... But I try my best to enjoy life in other ways. 

There is a podcast called : Love Your Life 

Everything on it is about enjoying life now: and that does not mean that you will sell your home and travel the world or spend it on cars... not at all, but it does mean that you will have to have a serious, honest, and raw conversation with yourself and ask yourself: 

1. What makes you happy? What would make you happy now? and what would make you happy later? 

In the podcast the host says describes how we often go after the shiny penny (any goal imaginable) because we think that the "car" the "house" the "investment" the "money" will make us happy. and in fact what we have to do is be happy first, be happy now and then go after the things or people or situations we want. 

She says: where ever you go, you take yourself with you. 

if you are an unhappy person : getting the car will only make you happy for a few mins. and then you will go back to being the unhappy person you always have been. 

When it comes to the market: there's cycles: It goes up and it goes down :) 

When it comes to selling: you can sell and buy smaller homes that can sustain you or not buy and live off of the cash... 

Those are technical things that a good realtor can help you with. 

I would suggest you make a list of what avenues you can take to re-invest portions of your net profits and how passive or active you want to be with those investments. There are many, many options out there that can benefit you depending on how involve you want to be. 

First decide what path you want to take? 

Decide what makes you happy? 

Decides how you will add the things that you like through out the day that will add the zest you seek in all things. (think hobbies, think your favorite coffee, think favorite people to be around)

Focus on positivity, on being kind, on being happy and the rest will come! 

Knowing what questions to ask implies that you have asked yourself several questions below: 

1. What type of investor do you want to be: passive or active? 

2. What will you focus on? 

a. Single family homes

b. multi-units 

c. etc etc 

3. What investment vehicle will you use first? 

a. Flipping ? 

b. Rental property (SFH) or Multi family ?

c. whole-selling ? 

d. Lending private (hard money) etc etc 

4. How much liquid capital (funds) do you have? 

a. A little bit of money: maybe you will buy your first primary residence or start whole selling... 

b. More money: buy and renovate to flip or to BRRRR ... etc

4. Will you be buying solo or with friends or family (with a partner) ? 

** 

As you can see, you will have to decide on all of these or most of these, bc Realtors like myself or accountants, attorneys, contractors, architects, lenders (the list goes on): have to know this info to help you out. 

Any good realtor will ask you these questions anyway and can guide you to the other missing pieces (team members). 

If I can suggest: 

1. Focus on generating a focus for yourself

2. Focus on learning (mostly what compliments your focus in #1) 

3. Focus on making more money from your job/career , reducing debt if any, and saving money. 

These will help you frame your path moving forward and your conversations and interview questions for all team members. 

Here to help if you have any questions! 

Sebastian :RE Investment Consultant 

Keller Williams Realty 

All great suggestions and comments from many smart people on here. 

The only thing I would add is (even if you can get 3,4,5 homes at once with loans or without by paying all cash)

Get one additional rental property in the area you want to go into (after doing plenty of research, talking to a local realtor, talking to a local lender, a local property manager, a RE attorney... etc ).

The first mistake that I see people make is that you want to do things yesterday... 

Get the first property and learn: 

1. Buying cash and then getting a loan for it: there will be all lot of ins and outs you will benefit from. 

2. You will learn from the transaction also: the offer process in that state, the escrow process...etc 

3. Stabilizing the property: getting it ready, maybe renovations, assisting with the interviews for the tenants, interviewing vendors etc 

4. Collecting payments, softwares, bank accounts.... etc 

5. Collecting data for taxes, saving on taxes, depreciation etc 

Once you have stabilize the home: maybe 6 months or maybe 12 months (what ever you feel comfortable with), then buy 1 or 2 more. Maybe more, depends on how fast you learn and availability of funds. 

* have an emergency fund for each property. 

* have an exit strategy 

I see too many people on bigger pockets wanting to leverage way too much, wanting to get to 10, 50, 100 units way too fast... and using partners or using other people's money and investing it without having the experience for it. 

Stress kills... Learn, enjoy the process, and achieve your goals! 

Good luck  

Are you thinking about refinancing the property once finished? (the end goal will determine your strategy and why I ask). 

I took a quick look at this property there on zillow: 

(I don't know the market there... so I don't know if this is over priced or under priced... and this is just an example): 

The property is 3,560 sq ft @ $372 per sq foot: listed for $1.325 million. 

So based on this: a 3,500 sq ft home would be worth about $360 to $375 per sq foot (assuming the home is priced well). 

In many areas : On the contrary: if you have a home that is 2,500 and an ADU is 1,000 sq ft: the numbers won't be the same. It is market specific, but you can say that the 2,500 living space would be closer to that $372 per/ sq ft (or $930k plus the value of the ADU) : so maybe $100k to $150k more : so you can see how it won't be the same value. (talk to several appraisers in your area or in the area you want to buy in before you decide on what to do!) and also cross reference with a good realtor that can give you values and "future values" for any scenario.

I would: 

Get the "team" together and have all parties give you input: 

1. Appraiser 

2. Realtor (that has knowledge of additions, construction and new construction) 

3. Architect / engineers 

4. Contractor 

Once you interview for each team member and have the "team" you want to work with: then you can have a zoom meeting so that you have synergy with the team and so that they understand each other's point of view and way of thinking. (some may be concern more with aesthetics, some with functionality, and some with being cost effective: so you have to understand and know what combination of all of that and balance of those you want for your project). 

example: sometimes I work with home owners or investors that want a good balance of those... or sometimes, some clients say to me...Sebastian, I don't care about saving money (I don't want to over pay) but I am not concern with budget to a realistic extent. :) 

I also saw: 

Listed for $700k (2500 sq ft) but it looks to be a fixer : @ $277 per sq ft with a huge lot: (I don't know if the same market as the home above: and where your realtor would come in... ) 

but if you look at this: you could buy something like this and renovate it: and add the ADU : 1000 sq ft for about $150k to $200k all in: where you spend $100k on the main home: and now you are all in for $700k + $100k +$200k : total $1 million (which is less than the finished home above).

If you are building new: 

The questions is : Why? To customize ? to save money? Only you can answer that question. 

if you buy a lot for $300k 

soil, surveys, etc + building plans + all details and + engineering + fees from city and fees for studies+ utilities: 

would be anywhere between : $50k to $100k (depending on city) and the people you work with. 

Construction: about $200 per sq ft: just to be conservative (our costs out here are much lower depending on scope of work). 

but with these numbers in mind: 

1: pre work: $100k (to RTI ready to issue permits)

2. 3,500 sq ft times $200 per sq ft: $700k 

3. Purchase of lot: i saw one on zillow for $300k 

4. hardscape/ landscape : $50k ball park 

total so far: $1.150 

contingency (aka emergency: $50k ) 

Total : $1.2 million for a custom home at 3,500 living space (you could design the home so that after the fact; you convert a wing of the home (1,000 sq ft) to the ADU.

the home would be worth about $1.3 + (equity of about $100k + ) 

**** 

If you go the other route: 

build home at 2,500 sq ft + ADU at 1,000 sq ft

you will end up with the same total build out: $1.150 

and the value: estimate: about $950k to $1 million + ADU VALUE or about $150k : total value: $1.150 (break even).

There are a lot of moving parts that I do not know, and I think that if you connect with the right people and create the team I mentioned above, they will give you the right numbers for 

1. Studies

2. Architecture and engineering along with other things like (title 24, etc etc ) 

3. City fees + utility fees

4. construction costs 

5. land costs (make sure you check on zoning and max % of build out) architect can do this for you: but better if you are on top of it so that you can manage the team. 

Had a free morning today :) : hope this helps you a little bit. 

Thanks David and yes he is right: 

I think you will get really more good advice on here... but unfortunately we are fishing at this point... as there are a lot of moving parts and someone that knows what they are doing should take lead on this: someone that can help you ask the right questions of the city, building and safety and to go onsite and see what you are working with. 

I think Dan's suggestion is best: go with that person or an architect (or drafter) that can guide you and put all the missing pieces together. 

They will charge you about $300 to $500 for an assessment and if it does qualify for more: adu or second unit, then they will of course charge you more to put everything together. But at this point, i don't think you know enough to move along by yourself. (hope you don't take insult in this.. just my honest advise) 

Aren't you working with a realtor to buy this place? (they should help at least guide you to the right next person to talk to and the right next move). 

when it comes to finding someone that would accept you doing air b and b on their property. 

*A lot of people would: you have to find the problem - their pain point and give them a solution. 

I work with a lot of conventional (your average rental) investors: 

what do they fear? 

1. Rent being on time

2. Having to evict someone 

3. Maintenance and repairs 

how do you fix that for them; 

1. You could take the risk: and pay 6 months or 12 months of rents in advance (big risk for you but big reward also). This means that you already did your home work and are diving in head first right? : so they will love that they get their money up-front 

*maybe even do 6 months in advance as a cushion and still pay your monthly rent to them: so that in january they get the rent (but have also 6 months upfront), in Feb. they get the rent... and still have the cushion : this way its not as expensive for you up-front but they feel safe (and do a lease for 2 years) this way you don't spend all the time and money getting it ready for them to take it away from you once they see you are achieving success... (have an exit clause for both parties). :) 

2. eviction: well... there will be no evictions bc with air b and b: people stay for 1, or 2, or 3, 4 weeks at a time... (figure out if that's the case in your market... what's the rules and laws and give them a solution): for example : what if an attorney said: in a worst case scenario, it would cost $5k to evict someone... so you say to the owner: it costs 5k to evict someone , so i would put $5k into an escrow account or a mutual account just as emergency money incase we have to go that route... 

3. maintenance and repairs: You need the place to look and function in a great way: so you could make the necessary cosmetic fixes and make sure that everything is working properly: so the pressure and financial burden is on you not on them as the owners. 

A lot of my regular investors : would love to get someone in the states that proposed this to them... Easy money for them and exactly what they expect. 

For you: there is some cost of doing business up-front but you would be making a profit with the bookings. 

You have to be up-front with people and find the "right" client (home owner) for you! They are out there (and a lot of them too!) 

This happens a lot: 

1. Make sure you are not paying a duplex price for a SFH on title ? (unless you want to of course: as the market is very competitive right now).

2. Call building and safety and tell them your scenario: I would think of worst case scenario: which will be that you either get the necessary permits or knock it down. (get a contractor to check the work: foundation, framing, electrical, plumbing etc : as the city will check on that and will want to make sure that everything is ok to issue permits). 

3. There is a strong chance that they will require you to do building plans, with full details and engineering : with up to date building codes: you will need a drafter or architect. and why its important to google : building and safety and speak to the correct personnel. 

4. Look at zoning: set backs: and make sure that the lot allows for a second unit: 

Remember that a second unit is not the same as an ADU: different parameters: like set backs from property lines and from main structure, also parking requirements, lot coverage and allowable total sq footage.

All questions that need to be answered before closing escrow. 

If not: you will have potential loses. 

To recap; say a duplex in that area goes for $500k  and single homes go for $400k 

and you are in escrow for $400k + - : then you my friend are getting market prices and the 2nd unit is a plus and the home may be a good deal even after knocking it down or having to permit the second home after the fact.