House Hacking with an ADU / In-law suite
8 Replies
Brett Simmon
posted about 1 year ago
Good Morning Everyone!!
Last year my wife and I purchased our forever home, this was before I found the BiggerPockets website and since then I'm looking at our forever home through a different lens. We have a 5 bed / 3 bath with an attached 2 car garage; there is also a detached 3 car garage. One of my ideas to get my feet wet into real estate investing is build an ADU / In-Law suite in about half of that detached garage. The ADU would have its own driveway, and back yard that is already partition with a lattice fence. My biggest concern is having my wife only a few yards away from a rental property.
Does anyone have any experience or advice with a rental ADU?
Would the ADU increase property value or is the detached garage more appealing to buyers?
Thanks,
Brett
Dylan Phillips
Real Estate Agent from Phoenix, Arizona
replied about 1 year ago
I don't personally have much experience with ADU's, but I have lived in a property that has one for rent. The truth is we never heard or saw the people. My biggest recommendation would be if your neighborhood/CCR's allow building a wall up the yard to totally separate it would be best to ease your concern.
I am looking to do this at my house once we move out and turn it into a rental property.
Yes, theoretically the ADU should increase the value of the home...so long as there is an alternative for parking that's not on the street or uncovered.
...I hope this helps!
John A Murray
Rental Property Investor from Long Beach, CA
replied about 1 year ago
I think you should be aware that the best results at this point in time would be the rental income. Doesn't seem like appraisers are able to give ADU's the value they merit, what with their guidelines and lack of comps. That should change in time, however. Besides, it's your forever home so you're not going anywhere for the time being.
Seems to me that if you could survive with the 2 car garage why not turn the whole 3 car into an ADU, if the rentals in your area are substantially more for a 3 bedroom compared to a studio/1 bedroom that 600sf would provide. The problem is the larger the ADU the more people you'll have close by.
Dylan's right about separation too; build a wall etc for maximum privacy.
Orlando Perez
from Diamond Bar, CA
replied about 1 year ago
Glad to hear that you're taking this approach. ADU are a great way to get additional rental income. However, there are some challenges with local municipalities and the rate that they are approving them. Other than that, you can would benefit significantly once you build and place tenants in their. Regarding your wife's concern about proximity, that is correct, however, you can also put barriers so that your can keep your privacy intact. Also, you may or may not want to manage the property (ADU). Consider a property manager, there are so many benefits to have that in your tool belt. Also, something to consider, if you want, you can do a cash out refi on you property. Now instead of your, lets just say 3 BD 2 BA dream home, you have that additional ADU, which is lets say 2BD 1 BA. Your comparables are 5 BD 3 BA. Which is significantly higher than what your original loan might be. So, in my opinion it would be good start to find out if you can actually do an ADU, than find a good Architect. Let me know if you need anything else. Best regards!
Brett Simmon
replied about 1 year ago
Thanks for the insight. I have actually met with the city zoning and permitting office and the ADU is allowed to be built on the property. They were extremely helpful and they gave me all the paperwork to move forward when we are ready to start. We just need to take the leap when we are ready.
Orlando Perez
from Diamond Bar, CA
replied about 1 year ago
Originally posted by @Brett Simmon :Thanks for the insight. I have actually met with the city zoning and permitting office and the ADU is allowed to be built on the property. They were extremely helpful and they gave me all the paperwork to move forward when we are ready to start. We just need to take the leap when we are ready.
Nice! Sounds good. Where city is the adu?
Brett Simmon
replied about 1 year ago
John A Murry. I have tooled around with the idea of making the whole unit an ADU but I do like to have my work shop and wood working is a hobby of mine. We live exactly 6 minutes from the from the main gate to Eglin AFB so my thoughts are that a small unit would be appealing to someone that wants to be close to work. Thoughts?
John A Murray
Rental Property Investor from Long Beach, CA
replied about 1 year ago
Originally posted by @Brett Simmon :John A Murry. I have tooled around with the idea of making the whole unit an ADU but I do like to have my work shop and wood working is a hobby of mine. We live exactly 6 minutes from the from the main gate to Eglin AFB so my thoughts are that a small unit would be appealing to someone that wants to be close to work. Thoughts?
I wouldn't let the ADU affect your life and your hobby. Giving up a nice place to wood work AND having a bunch of people in your backyard doesn't sound attractive to me either. Keep in mind your tenant(s) won't be happy with noisy saws etc evenings and weekends. I'd go with the 600 sf one-person ADU, fence it off for maximum privacy, and try to eliminate as much noise as possible from your shop.
Drew Leo
Investor from Walnut, Ca
replied about 1 year ago
It may sound like strange but building larger may attract a certain tenant that wants the larger sqft AND it may even be a single person with money. Say a air traffic controller who is single/married that wants a place near the airport but his wife/family is 3 hours away. Less people, less wear for the same rent. You are in a very good situation. Some investors give up much more than a hobby space to increase their probability for a successful investment. Other scenarios is that the bigger and better your ADU can be,it would increase your chances of attracting better tenants...the ones that you feel safer around your family. When possible, I think it's wise to buy your problems away. Things like health, death, disasters, governments, etc I am pretty powerless to influence. If you preserve the space for your personal usage, you're containing the probability of something better from happening.