Austin Househack- SFH and ADU

9 Replies

Hi! My name is Sarah, and I just moved to Austin from Chicago. I am a consultant, and am currently paying $1,800/month for a one bedroom in east Austin. I have been very interested in buying a tiny home once my lease ends but strugggled wIth where to park it. Then i started to read about individuals buying a single family home and adding a ADU. I am interested in renting out the SFH and living in the ADU, and was thinking east Austin since I love it here. I have steady income & great credit score but no money saved up. Is this an option for me? What would the first steps be?
@Sarah Schmidt There’s down payment assistance programs but you can also find existing sfh with an ADU which would be the more cost effective way to going about things. I just bought a 3/1 sfh in east Austin with a 1/1 in the backyard!

@sarah 

@Sarah Schmidt Most homes you find with an existing ADU is not a deal in ltv terms. You typically need to buy a house zoned for an adu and construct it yourself to realize any equity. If you are buying a sfh in Austin there are many variables to look at. Location, taxes, ins, dn pmt, land restrictions, loan program.

Do you have to be downtown? 

@Danny Webber I strongly disagree. Constructing a new ADU over rehabbing something existing would be much less cost effective in most cases. Not to mention you’d need to be well versed on zoning when looking for a property.

@Jordan Moorhead There is no way on earth buying an already constructed/renovated house with ADU in Austin is more affordable than buying a house and doing your own ADU right now..... Unless someone is having a fire sale which they are not or if someone gets screwed over during construction... Other than that you will pay 100% LTV for an already constructed ADU w/ house vs buying a house and building at a lower cost per sqft then the ARV value will be which is very doable.

It may be different where you are at so i cannot speak to that market. I am willing to listen to any opinions or look at any numbers that may change my mind but i am 99% if there are any they are 1-off's in the Austin market. 

Zoning is not an issue. That's part of being a good investor or hiring the right Broker.

Good conversation though!

hi Sarah, hgtv has really done a disservice to people making you think you can plop a tiny home anywhere and live mortgage free and happy. I wrote extensively about this topic on my website. Tiny homes (with wheels, ie: non permanent) are illegal to place on SFR pretty much anywhere in the country. They are classified as Rvs and must be parked in an RV Park, but there's even a lot of restrictions there.

To build an ADU, which is about as close to a tiny house as you can legally get, you need to build on a SFR. With no down payment I don't know how you'd pay for that. ADUs are expensive. Their cost per square feet is higher than larger sfh because you don't have the offset of cheap square footage, hallways, big bedrooms, etc and you still have to have a bathroom and kitchen.

The most recent article I wrote about on my site talks about subdividing lots and selling the ADU separately. You may be able to find someone willing to let you build on their land and the subdivide it and sell to you. Obviously a bit trickier, but cheaper than buying an entire home + ADU and completely legal.

Good luck! 

@Danny Webber I just bought one in east Austin for $250k that had a 3/1 and 1/1. It needs a decent rehab but I doubt I would have found a 3/1 to buy plus built an ADU for under $300k.

@Jordan Moorhead depends on the area, rehab, etc... If you got a deal it is a 1-off not the norm. Also, you are just starting this, not finished so let me know the full numbers when done. Theory is irrelevant in this market. I'd also like to know your total ltv when done or projected ARV vs loan. You could be at 80% or 100%.

Without knowing true details everything else is just air... (no offense)

Congrats though, sounds like you may have a good deal depending on how it plays out. 

@Danny Webber very unclear on what you’re asking. You want to know the total loan to value after the project as finished? And the you want to know projected After Repair Value VS the loan?