Show Links:
- Scout Red program https://scoutred.com/
- Property Radar for listing pulling https://www.propertyradar.com/
- NSREI real estate association https://nsdrei.org/
- Derek Harms website https://derekharmsgroup.com
- Derek on Instagram https://www.instagram.com/derekharmsgroup/?hl=en
- RealEstateGals.com for Tonya
- Checkout our weekly meetup here!
Show notes for Single Family Rental Value Add Strategies with Derek Harms!
Derek Harms is hanging in San Diego
Tonya Spivey and Julie are in Seattle.
Derek hosts the N San Diego real estate association, which is really fun.
Derek’s Real Estate Story
Derek bought a property that was 3 hours away, but made more money than 6 months of bartending. Then moved to Florida and bought the worst house in the best neighborhood.
Went from San Diego to Florida to buying mobile home parks, to back to San Diego.
Are they called Granny Flats or AUD’s in San Diego… AUD is the correct term.
JR AUD – Not a full kitchen, attached to house, and not rented out.
Favorite deals…
Has existing structure, because it’s easier to get permitted. Main structure has a reconfiguration component.
Parking is a case by case basis. You have street access and you have alley access. In San Diego if you’re within a mile of public transit you don’t have to add parking.
On every house they get everything onto a CAD program and start moving walls to see what the best use of the space is. People will pay for quality use of space.
Derek has someone that’s not an architect but very good at working with CAD and configuring these properties.
He has a designer, engineer, and contractor on the team.
$750 will get… structural engineer. Moving load bearing framing. If you are going to resell the property, this is worth so much!
In San Diego permitting takes way too long. It would take an extra 3-4 months if we have to go through the permitting process because San Diego is so understaffed. If we added square feet, that’s different. We haven’t had any lending issues on these, if we decide to sell.
Garage conversions
Garages can have bad looking slabs because they aren’t setup to hold habitable structures on top. Grade is SO important. You have to know where water will flow. Ask me how I know.
Firewalls – If it’s next to the property line you will most likely have to have a firewall. You can’t have a window facing the neighboring structure. Looking at windows, bathrooms, sewer lines, etc.
What are you looking for…
Absolutely if you can get a due diligence period, get that. Our inspection period is me and my team walking the property. It’s more risky, but we are baking that into our offers.
It’s easy enough to look for slope and drainage. Looking at a slab to see what you can fine. Does it look like river rock… If there are stem walls we have to underline it with more robust concrete and rebar.
If you are doing a 20/20… maybe $8-20k depending on how bad it is for the foundation issues. You don’t skimp on foundation, plumbing, sewer, and electrical. It will come back to you.
In a 1 car garage we can get a studio, bathroom, stackable laundry, and create a cute space.
Setback rules
In San Diego they are still trying to figure this out. And sometimes you don’t need any setbacks. We have a cool program called Scout Red. It’s a really cool zoning or setback program.
Ground level
We usually stick with the ground level because you have to beef up the foundation. But we are getting into adding living spaces above the garage.
Space you can add
In San Diego you can add 50% of the main house size.
Pulling list opportunities
Detached garage with a home that is of a certain size…
We use Property Radar. Single family property in geographic region that has certain zoning. Single family with detached garages with RM1 zoning that hasn’t been sold in 20 years, lot size, and owner is 70 years or older.
What does a garage conversion cost?
All in we are about $110k, depending on how bad the property is. About $300 a foot for full garage conversions. Our normal house renovations are around $60-70 a foot.
Adding AUD for your property
Get a feasibility study for a full review of your lot for a couple thousand dollars. From there you can have an architect draw up plans for $8-16k. Then you have building costs. And I would give or take 20%.
Let’s say it costs $150k to create an AUD that you can cash flow $1500 a month. That sounds like a lot, but where else can you get a return like that?
In San Diego… we can’t build out, we have to build up.
Appraisals
Early on there was no data. Even now it’s very limited. We’ve been batting 1000, or north of what we’ve been budgeted for. Meet the appraiser on site, always.
We bring an appraisal packet with existing floor plan and original. Then list all the buzzwords for what we’ve added to the property. How much money we’ve put into the property (only if it’s warranted). Bring the comps that you want them to see AND the bad comps. Get it out in the open.
A permitted ADU in San Diego can get it’s own address! HUGE NUGGET!!
Leave a Reply