SoCal ADU House Hack...good option finally?

3 Replies

Whelp, the damn RE bug got me.  I'd be mad about most other bugs but this one looks like a solid bite.  

I am in the sponge phase.  I am BLASTING through BP's bookstore and oddly, every time tax benefits come up, I get too excited even though I don't get it all yet.  Maybe it's bc I have my Grandfather's blood in me (he was a CPA).

So I'm reading the BP's House Hacking book by Craig.  I'm only 15% into it right now, but I've read the other books and have a solid understanding of House Hacking and I read every single forum post about house hacking in SoCal in the last 3 years to see what others have already's expensive and I won't live for free, so maybe ya get 50-80% of the costs covered.  And there's varying levels of house hacking with various payoffs.

My situation is I'm married with one 10 month old, might be another kiddo within 2 years.  My wife is open to house hacking but NOT with roommates (I agree, we're 33 years old and have a kid).  The duplex's...well I'm still open to them but I want to talk about ADUs!!!

I feel like not enough people are talking about them with these new CA 2020 laws that make them so much easier to get approved and built faster.  My main questions about these little wonders...

1) Has anyone done the ADU thing here in 2020 with the new laws? Whats the experience?

2) How do I look for a SFR that *could* get an ADU? How does one filter for that on the MLS? I have an agent that can do this for me but wondering what to tell him. Many ADUs start as detached garage conversion.

3) Do ADU's have any forced appreciation that benefit the property?

4) What type of financing can be done for the SFR + ADU construction?

5) Do lenders take into account rent from ADUs when determining loan amount?  I think it's usually 70-90% but what is fair market value rent for ADUs??

6) Are prefabs viable yet with this?

7) You made it this far?  This is just a thank you :)

I'm putting in offers now with intention of adding an ADU:

1. Working on it, but many of the counties/cities haven't updated their ADU laws and you might get some resistance on ADUs. California has mandated the new ADU-friendly laws and might need to educate some local municipalities.

2. Depends what kind of ADU do you want? 2 car garage conversion and/or separate unit in the back seem to be the most common. I would look for a 2 car garage or big lot where you can place an ADU in the back. 1200sqft seems to be the largest ADU you can put in my area

3. This is widely debated and answers seem to vary

4. Renovation loans. Can use your HELOC, credit, whatever other kind of financing

5.Depends on your lender, loan type

6. Yes, check with your city/county first

@Larry Marshall I house hack a 2-unit here with wife and our little one. This specific property was purchased then moved into towards end of last year so relatively recent. This is one option. The other option is a single family with an accessory dwelling unit. If you don't want to build one you can look for homes that already have an ADU built. The different is lending is that for 2 units, your lender can use rent from second unit towards your income so you can qualify for a higher loan and with ADUs they can't do that.

@Larry Marshall

1) I did mine in 2019 so I don't have experience using the 2020 regulations.

2) The majority of R1 lots can accommodate an ADU in some fashion. Whether or not the lots you're looking at can accommodate the ADU you're looking to build is another question.

3) I agree with Derricks answer. If this is your first deal and you're looking to be conservative, the answer is no.

4) Cash, refis, and HELOCs seem most popular. Prefab companies offer their own financing.

5) Probably not

6) Probably yes

7) You're welcome!