Success Story: Maximizing Returns through an ADU Addition
Mortgage Vintage, Inc. (MVI) has established itself as a trusted hard money lender, offering business purpose loans tailored for both seasoned and emerging real estate investors. A highlight from our loan portfolio is the “ADU Investment Model”, designed to empower investors to expand on existing properties by adding Additional Dwelling Units, enhancing their rental yield. The transformation of this property serves as a testament to our commitment and our investors’ vision, showcasing the true potential of strategic property development.
The Subject:
- Property: 8460 Kittyhawk Ave, Los Angeles, CA 90045
- Type: Duplex Rental Investment Property, with new ADU units
Layout:
Existing Units: 2x 1BR Duplexes
New ADUs: 2 units totaling 1,900 SF
- Condition: Initial 2x 1BR duplexes in a fully occupied state.
The Scenario:
- The investor recognized potential in this property, with its existing two 1-bedroom duplexes bringing in only $3,100 per month.
- The vision was clear: to leverage the available space and strategically add two new construction ADU units in the rear.
- This development is set in a location east of Marina Del Rey, Playa Del Rey, and near LAX, offering proximity to schools, shopping, dining, and highways.
- The original units were consistently generating substantial income, laying a solid foundation for further development.
The Solution:
- To realize this vision, a business purpose 2nd TD cash-out was deployed.
- The entire loan amount ($400,000) was allocated to Funds Control, earmarked specifically for the construction of the two ADUs.
- This loan package boasted favorable terms: 6 months of guaranteed interest, 3 months of prepaid interest, and a lucrative 9.50% annualized return.
Financials:
- Total Construction Cost for ADUs: $400,000
- Appraised Value: $1,625,000
- Monthly Rental Income (Post-Construction): $11,300
- CLTV: 60.62%
- Net CLTV: 34.26%
- FICO Score: 677
Highlights:
This trust deed opportunity stood out due to several factors:
- This property’s strategic location and consistent income from the duplexes.
- The potential for significant rental income growth with the new ADUs.
- Strong financial indicators like the 9.50% annualized return and a 100% allocation to Funds Control.
- The promising CLTV metrics at 60.62% and Net CLTV of 34.26%.
- An unwavering monthly rental income post-development.
By combining these components, the property emerges as an exceptional investment opportunity in the real estate market. The incorporation of two additional units not only enhances its potential for rental income but also strengthens its position in a sought-after location in Los Angeles.