All Forum Posts by: Sebastian Marroquin

Everyone has an opinion and is always based on where your head is at that given time. Not wrong, just your take on it. 

Follow me on this journey :) 

You have 2 investors: 

1. One lives in Ohio 

2. The other one lives in California 

Both will be scared of each other's state bc of the distance, the lack of knowledge, the lack of control... etc 

Both could be successful in their respective markets and both can fail in their own back yard... So, why make a blanket statement either way... 

I lost $15k in a flip deal along with 5 other people that also lost 15k each in an area only 5 mins away from me here in LA. Why? You may ask... well... simply because at that time, we did not know what we were doing.

1. Lack of knowledge 

2. decision makers in the deal made the wrong decision

3. No formal contracts

4. No exit strategy or reserves 

5. No sense of timeline 

6. Wrong team (contractor, Architect, knowledge of permits and process). 

7. etc etc etc 

You all have a valid point here, 100%, but if you lived in Ohio, or Florida, or anywhere else, how would you go about meeting people for your team? 

People can take advantage of you in your backyard or elsewhere. So, how would you put yourself in a situation to win? 

When it comes to the actual investment: 

There are many different ways you can start: from a numbers perspective, think about this: 

A property in Columbus Ohio say for $200k 

Your down payment would have to be: 20% or $40k plus closing costs etc etc 

In your back yard: assuming this is your first property: 

price : $500k at 3.5% : down payment : $17500 plus closing costs... less than the above. At $600k even 5% down : 30k or $40k all in. Similar to the investment. 

and if this is your second property: rent the first one and buy a second 'upgrade' primary home with similar numbers as mentioned. 

The point: 

You see how there are options in your back yard. 

When all is said and done: 

5 years from now : What do you see yourself owning? 

Do you want to be a passive investors (do nothing for the homes) or an active investors (hands on approach)? 

Do you want to focus on appreciation or cash flow? 

Do you love real estate or is this a means to an end for you? (if you love it and breath it: you will also love to learn about it and even like to learn from your mistakes). 

There is risks everywhere and in any investment... 

1. Research (markets, submarkets, rents, building teams, options, financing options)

2. Understand how much you need for your first or second investment etc : and understand how much you (you) need in reserves for the property, for your personal emergency fund, in a worst case scenario i.e. the property burns down, you have to evict tenants and have to carry the mortgage for 6 months plus pay legal fees etc. 

3. What's your financial position ? (A lot of people on here pride themselves in using OPM or putting as little as possible on every property... Don't worry about "them" figure out where you are and where you want to be and what your path to that goal will be. 

If you had $1 million dollars sitting in the bank right now - you would be ok buying a rental home for 100k knowing that you can go through any unforeseen storms... 

So what is your position right now? and do you simply need to save more money to feel safe? (Define what safe means to you). 

Good luck. 

Any of you have specifically bought New constitution SFRs as rental homes? 

Pros / Cons? 

Usually new construction even in : Ohio, Indiana, Florida - tend to be more expensive for obvious reasons: Was the low maintenance cost effective? A better investment for you? Less headaches with tenants? Higher rents? 

I'm looking at 3 to 4 bedrooms : for about $180k to $220k about 1700 to 2000 sq ft. 

Not sure if you answered this already: 

Do you own a place already? (primary home?) 

It seems that you are contemplating great options and terms like the 2% rule, but you have to know that not even savvy investors are achieving this around the US and def. not in California. 

based on some answers you gave above: you said you don't know anything about rehabbing, managing a property, etc 

Learn more about this: read the books, go to the meet ups, network. 

The 1% rule is difficult enough out here. 

The only way I've seen people be able to cash flow in CA with a SFH is either by putting down a large down payment or by going the ADU route.

That alone requires you to understand a lot of things: 

1. assessing property 

2. Rents 

3. Construction 

4. building plans 

5. city permits (zoning and building) 

etc and you or anyone else may be saying : well you are not going to do all of those... you are not... but you need to be able to recognize when people are over changing you, or not doing enough work for the money you have paid them already... etc 

You have to  be able to assemble teams: realtors, contractors, architects and drafters... or work with someone that can plug you in with their team. 

the list goes on. 

Too often I see on here, people wanting to "start" investing and running before walking. I am not saying you cannot do it. I am saying that you need education, experience, money.... 

start small: 

buy a condo- sfr and renovate the kitchen, or don't and live in it a couple of years. Just like monopoly, you will get the hang of it soon. Why rush it... no need. Patience is key. 

build up your capital, grow, educate yourself. 

Unless you have a million dollars under a mattress somewhere and don't mind losing it. In that case I say, go for it! You only live once.  :) 

We are doing a couple of projects in Alhambra right now: (also in altadena, pasadena, azusa, el sereno, highland park etc) 

The city of alhambra is relatively easy compared to pasadena or altadena that is similar but the timing is longer for permits. 

you are right in that alhambra is surrounded by south pasadena and san marino and is appreciating, but I wouldn't discount other cities. 

If you love the economics, demographics, and real estate in Alhambra, I say, why not.... ! 

I would consider my buying to be dependent on : 

1. Timing for zoning and building permits : some cities are 2 to 4 months and other cities are more like 4 to 7 months For ADUs or additions. 

2. Some cities are almost over the counter : as in less than 2 weeks (within reason) 

3. Also scope of work: if you are only converting a garage : then this may not apply as much 

but if you are adding the max square footage: then some cities like pasadena will only allow up to 800 sq ft where other cities will allow 600 and others up to the max (1200 sq ft). 

Like someone else said on here: 

Think about: are you banking on equity appreciation or cash flow? 

When it comes to rents: you will see that Alhambra is similar to Pasadena , altadena, san gabriel, Monrovia, maybe a few other cities. 

Where Highland park, silver lake, eagle rock, NELA areas - are commanding higher rents and azusa, glendora, covina are a lot less expensive to buy, but rents also are a bit lower. 

Similar home 3/2 baths 1500 sq ft 

Pasadena: up to $2500 $4000  

Alhambra $2500 to $4000 

Altadena : $2500 to $4000 

and Highland park : $3k for a 2 bed 1 bath 700 sq ft and up 

* I would suggest for your to identify 3 to 4 cities to do research : 

and research 

1. Prices 

2. rents (1,2,3,4 bedroom homes) 

3. permits 

4. timelines for permits 

We help people buy 1 to 4 unit homes, renovate, add sq ft, and we have the full teams we network with to do so. 

An REO does not always imply a "good deal"

It sounds to me like you need an agent that can give you options. 

You are a contractor and can fix the homes for about 50% to 60% of what us retail people can fix a home for (correct me if I'm wrong here... ) :) 

But don't get hung up on "short sales" ", "REOs" , Pre-foreclosures... etc This market is extremely hot in many cities and they will not always be a good deal. 

#1: look at your financing : you could (could) get a better deal if you are doing "all cash" or "hard money" as its often treated as cash bc of the speed you can close in. 

If you don't have all cash or willing to do hard money: then you have to be creative and understand that any realtor will first go to the the cash investors or HM if they have a great deal. 

For finding the home:

1. You will always get a better deal when you find the home yourself: off market deals: the problem is that you dont know how to find them and learning to find them may be cost consuming and be a net cost to you : as opposed to finding a good realtor that can help you find them. 

Again you are a contractor so i think, depending on your capital : you could go after homes that people don't want to go for : 

1. foundation problems 

2. Major fixer 

3. burned homes etc 

As a contractor : I would suggest you look at your market: if where you live homes are selling for over $150 per sq foot as an example: 

1. Go after 2 beds 1 bath: at around 800 to 1000 sq ft: that are priced at market or below market and 

ADD 1000 sq ft. (you could probably add sq ft for about $75 to $80 per sq ft) where the value once added is $150 or more p/sqft . 

So now imagine if you get a home at 80% of value: thats a fixer: and you add 1000 sq ft : you can then refinance that home and pull out most of your investment or more and do it again.

I suggest this because I assume that you will be able to do it for this price, bc you also know how to work with drafters and architects and you know your way around the city! 

If you don't know any of these: net work. 

Make sure you go into a city that has comps at the prices you need at around 1800 to 2200 sq ft. Do your homework and go to work. Assuming you can hit these numbers, you shouldn't have a problem finding a money partner (as long as you can be accountable of the construction of this). 

This works at market value: and anything lower from market as a purchase price will be profit. 

People keep waiting for the short sales and REOs : but your financing has to be in place when and if they come. 

Wholesellers, realtors, other investors: all your best friends! 

Hello: 

For the main person here asking the permitting question... 

1: before you start anything: go to the source: step into building and safety and ask the questions you need answers to. Make sure you speak to building ? Planning? fire? public works? etc (ask planning: who should i speak to next? and etc etc) : do not rely on us here or google... which are very helpful. 

If you already own the home: then go to that city's building dept. 

If you do not own the home yet: ID the cities where you will buy (and these will be determined by both price: and also what you find out in building and safety : some have impact fees ... and some don't... some charge 5k all in and some will be 20k or more. So if you have a check list of what to check on before buying, will make it easy to do your due diligence. A realtor or drafter with experience will help. 

Then once you id the city (bc of price and bc of fees to convert) then you can talk to drafters and contractor to see what construction will entail : single level - second level... attached - detached... etc 

Someone on here mentioned having a question about adding a second level to existing garage or starting over... 

I know that if you use an existing structure : you will have to reinforce the foundation and framing : which could be in the 15k to 30k range and then the const to build on top... 

so my drafter has said to me recently... that its best to scrape and start over. Which I hadn't thought about : and bc a garage is about 20k to 25k to build... it would make sense to just start over. Unless you have to abide by new codes and set backs (if garage is on property lines) so find that out also first: you could leave a wall and not have to abide by it: ask the question first. but from a construction perspective: 

It will make sense to start over: safer, faster, efficient and new! 

Good luck 

There's a lot of "what Ifs" in this conversation... 

This is more for peace of mind really... This is a lot like getting car insurance: we all hope for an accident never to happen, and always glad to have the insurance when it does! 

I happened to be talking to my architect when writing this comment and asked him about it. He is on the same page as me. 

If you can afford it, then get the retro-fit and the insurance as it will protect you and the home even more. But just know that if the earthquake is big enough, the retro-fit won't help much and unfortunate the insurance will but you may not be alive for it. 

It's all about preparation and pre-planning. You worked hard for your investment and I know $60 a month digs into your investment or returns... but you will thank yourself if something happens and you need to use the insurance. 

I would say, do your numbers and let the math make your decision. Consider what someone said on here about the deductible: a super high deductible will make the insurance worthless, as you won't have the money for the deductible anyway... 

** by the way, as a realtor, almost 100% of our clients that buy homes are told by inspectors that the home's foundation needs a retro-fit. Almost 100% of them do not do it. I do recommend you go to "foundation works" or Alpha (google them) and get a foundation specific inspection : they will give you (usually) 2 bids: one for an immediate fix on the foundation : and the other bid for retro-fit. (retro fit with them is usually about 25k to $35k ) : 

I would recommend you do the immediate work with a contractor or them (a license contractor will be a fraction of the cost). 

Assess: do your math: decide. 

Good luck. 

@Marty L.
I am exploring an addition and got a rough estimate of 50k all in on a 900sq foot ADU. If I ever move out to a different neighborhood I will reconsider. I do have equity on the property but I dont plan on using that anytime soon.

: sebastian I agree with @Ami Singh : 50k for a new construction Adu is very low (which seems good) but a bid that low may hurt you more than help you. Thats $55 per sq ft. Even Contractors that are not making any profit cannot make that number work between just material and labor. 

The lowest I have heard a contractor do it for (with no profit) is for about $80 per sq ft. 

If you have a family member contractor (that knows what they are doing and can do it in a timely manner) will still be at around 90/100$ per sq ft. 

I would cautioned you to go with someone like that. They just won't finish the project... 

Then you have plans to build ($5k to $10k ) and city fees: $5k to $20k depending on city. 

At this point in my life: I know that its always good to negotiate on price but also that people that are good at what they do, timely, good communicators, knowledgeable, ethical and honest deserve to make a reasonable profit. 

hey guys - the numbers will vary depending on city (purchase price etc ). 

There are pros- and cons to both strategies. 

1. less money up front but property is much more expensive (2 units) 

2. Purchase is a lot less, you add value to the home (equity) but you need more money up front for conversion + purchase 

https://www.biggerpockets.com/...

@Marty L. hey marty 

I am going to assume that you have a SFH in Burbank: only bc you mentioned that you were house hacking:

1. if you do: have you looked into putting in an ADU or Jr. ADU or both: it would increase your home value and your cash flow for about 40k to 60k (I don't think you can buy another unit and rent it out for $1500 here in the LA area or OH (without the implied risk) :)

2. If you own a condo in burbank: then why not do a primary residence purchase in adjacent cities: i.e. sun valley, or azusa, glendora etc : once your property is rented out fully: you could use a portion of the rents as income and could qualify for a higher mortgage loan. 

You could go further out and buy a SFH and again convert the garage to ADU etc.

I'm putting up 2 units for sale in Pasadena : they will go for about 950k to 1 million 

Adjacent cities as you know, have similar price points. 

I know you don't want to sell... and if you increase your income or decrease your debt or increase your funds... then don't. 

but also consider your (return on equity? ) 

You may have 100k , 200k , 300k + sitting in equity... what is that money doing for you? 

I am very conservative and if you asked me that question the same way: I would say - that it works for me and already working on the next one. 

So obviously (don't change your belief system... ) This comment is just incase you have not done the math and consider that perspective. 

I guess I am making a lot of assumptions...