Anyone building ADUs/JADUs in the Fresno/ Clovis area?
Hey everyone,
I am looking into investing in long-term rentals in Fresno sometime toward, specifically single family homes with the intention to build both an ADU and JADU on every property. The plan is to BRRRR fixers with hard money or funding partners, and then build the ADUs (home equity loan maybe?). I'm in it for the cash flow (although I wouldn't complain if the ADUs added a decent amount of equity). Has anyone built an ADU/JADU in the Fresno area? Did you get an appraisal after the build? If so, how much equity did the ADU add to the property?
I would like to know if ADUS add or decrease property value in Fresno and if the rents are worth building the ADU as an owner builder (I have built 1 JADU and 3 ADUS as an owner builder at about $90 per square foot).
ADUs in my hometown, where I invest in, add a significant amount of value to a property, only problem is that my market still has buyers paying over asking (not nearly as much as when rates were low though, $10k-$15k is common) for a move in ready house). Just not enough supply and buyers are going in with two families on a single family house.
David,
Love the comments here! I'm actually in process of building 4 ADUs and 1 JADU in Fresno/Clovis. We have real estate team and construction company so more than happy to lend any bit of advice I can. 1 bed ADU in decent part of town will rent for $1,200/month. For us it's no brainer. There are even pre supplied plans from the city that fast track the process…and those plans are free! For those that build on their own properties, there is a company that will lend up to $140k for the buildout at rates in the 3% range (gov funded). Lots of opportunity here in my mind!
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Real Estate Agent California (#02059371)
- 559-242-4405
- http://savvyenterprises.org
it seems like you may be unaware that a JADU requires owner occupied. The is no JADU without OO.
In most CA markets the added ADU adds less value than the cost to add a hands off ADU addition. Seeing you are owner/builder, you may not have the negative equity that most people adding an ADU will have, especially if you can really build a stand alone ADU all in at $90/ft (I am a bit skeptical).
ADU additions have other issues (other than the initial negative position) such as 1) no income until complete which can easily take a year 2) limited finance options 3) detracts from existing unit (yard, privacy, garage, etc) 4) less potential purchasers at exit as their are many more people looking to purchase personal home than RE investors 5) lots of work. Likely as much or more work than a BRRRR, but at much lower return 6) cheaper and less work to buy property with an existing ADU. let some other chump pay more for adding the ADU than the value added by the ADU.
Good luck
Hi David!
I'm an investor in Fresno and I own a few properties with ADUs. As the comment above, JDUs are only allowed if you are living in the house yourself. But you can still build an attached ADU if that works. ADUs here do add value, but, in my experience and conversations with local appraisers, never as much as it costs to build the ADU. I would love to get in touch and talk about the process and market in Fresno. Having been born and raised here, I know the area like the back of my hand.
Quote from @Dan Heuschele:Beginning Jan 2023, JADUs will no longer requre owner occupany. 3 ADU bills passed in October allowed this change amongst more.
it seems like you may be unaware that a JADU requires owner occupied. The is no JADU without OO.
In most CA markets the added ADU adds less value than the cost to add a hands off ADU addition. Seeing you are owner/builder, you may not have the negative equity that most people adding an ADU will have, especially if you can really build a stand alone ADU all in at $90/ft (I am a bit skeptical).
ADU additions have other issues (other than the initial negative position) such as 1) no income until complete which can easily take a year 2) limited finance options 3) detracts from existing unit (yard, privacy, garage, etc) 4) less potential purchasers at exit as their are many more people looking to purchase personal home than RE investors 5) lots of work. Likely as much or more work than a BRRRR, but at much lower return 6) cheaper and less work to buy property with an existing ADU. let some other chump pay more for adding the ADU than the value added by the ADU.Good luck
I get that all the time about the cost per square ft. The cheapest build I've done was for a 488 sq ft jadu conversion at about $62 per sq ft (before sb13 lowered the cost of permits) in 3 months. It rents for $1500. But this is in a higher cost of living area.
i personally find new construction much easier than fix and flips, at least for long term rentals. Least likely to have maintenance issues since its a new build. Just sucks that it can take a while for single family new construction.
Hello, I'm in Fresno and owner occupy my house currently. I've got a 7,400 sq ft lot with a good amount of room in the backyard. I'm wondering what I should consider adding that would maximize future potential rent and get my arv up? Also wondering say someone builds a 1,000 sq ft adu in the back yard how much value would that add in Fresno?
David,
Would be happy to lend an ear! I'm investor/agent but my partner run's construction company and we are in process of building 6 ADU's right now in Clovis and Fresno.
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Real Estate Agent California (#02059371)
- 559-242-4405
- http://savvyenterprises.org
Quote from @Thomas Jameson:
Hello, I'm in Fresno and owner occupy my house currently. I've got a 7,400 sq ft lot with a good amount of room in the backyard. I'm wondering what I should consider adding that would maximize future potential rent and get my arv up? Also wondering say someone builds a 1,000 sq ft adu in the back yard how much value would that add in Fresno?
In most coastal southern CA markets, the ADU addition will cost more than the value added by a hands off ADU addition. I would be surprised if the typical ADU in Fresno can be added for less value than it adds in value.
You can search bigger pockets for many posts on ADU appraisals that were far less than the costs of a hands off ADU addition.
Good luck
@Thomas Jameson what's up David, there are a few nuances that change with each home, different parts of town will have different things you can do to improve value. i.e. with the ADU, in some areas of town that may be a bit of a nuisance as buyers prefer a larger backyard and would rather just by a 4 bed rather than a 3 bed with an ADU in the back. In other parts of town an ADU can make the home a lot more attractive and raise value because it's likely that a larger family will purchase it and wants older kids or a grandparent to live in the back.
Apart from that, adding value to your home is better done when you are getting ready to sell it unless you want to enjoy your improvements prior. As an example, if you upgrade the bathrooms and kitchen now, which is typical to raise value, it may be done in a really trendy way but in 5 years the trends can change, so it's best to wait until you are ready to sell it to improve it so you are as trendy as possible with your materials and design.
as far as rent goes, the ARV in the backyard may improve your overall gross rent if you can create a separate entrance to it so that someone can rent the back separately and now you have a duplex, your rent will go down in the house slightly because you are taking away their yard space but usually that's worth it.
there could be a lot of other things that may help you improve value but you'd just need to have a walk through with a trusted realtor who knows what they are doing and they can give you some good thoughts on where to spend money and where not to. Good luck!
Quote from @Jeff Zimmerman:
Hey Jeff, sorry for the delayed response... I'm a stage 4 brain cancer survivor and got busy with Dr appointments this month. So if I'm getting this correct it sounds like the only benefit would be additional cash flow? That it actually brings the property value down as not everyone wants an extra house in the backyard.@David M seymour what's up David, there are a few nuances that change with each home, different parts of town will have different things you can do to improve value. i.e. with the ADU, in some areas of town that may be a bit of a nuisance as buyers prefer a larger backyard and would rather just by a 4 bed rather than a 3 bed with an ADU in the back. In other parts of town an ADU can make the home a lot more attractive and raise value because it's likely that a larger family will purchase it and wants older kids or a grandparent to live in the back.
Apart from that, adding value to your home is better done when you are getting ready to sell it unless you want to enjoy your improvements prior. As an example, if you upgrade the bathrooms and kitchen now, which is typical to raise value, it may be done in a really trendy way but in 5 years the trends can change, so it's best to wait until you are ready to sell it to improve it so you are as trendy as possible with your materials and design.
as far as rent goes, the ARV in the backyard may improve your overall gross rent if you can create a separate entrance to it so that someone can rent the back separately and now you have a duplex, your rent will go down in the house slightly because you are taking away their yard space but usually that's worth it.
there could be a lot of other things that may help you improve value but you'd just need to have a walk through with a trusted realtor who knows what they are doing and they can give you some good thoughts on where to spend money and where not to. Good luck!
Hey David, sorry to hear that you had to go through cancer but congrats on beating it! awesome! Yeah that's basically correct, the main thing to consider is area of town and layout. Some families don't want a garage and would prefer to have an extra house/room for family, these are mostly in B or C neighborhoods. A neighborhoods likely wouldn't want an ADU IF it takes away from the yard or garage.
does that make sense?