Hello, I have a few SFH rental properties in downtown Phoenix that are on .4 acres lot. I am considering building an ADU for additional LT rent. How much value would I add with a permitted ADU? For example, if a 1,600 sq ft main house is appraised at $100 sq/ft, what could I expect a 600 sq ft ADU of similar build quality to be appraised for?
Developer · Mesa, Maricopa County · Member since 2019 · 43 posts · 43 votes
2y
Hey Chad, there are different methods of appraisal. Sales/market, cost and the income approach.
Cost approach would be what it's costs to replicate it, however, cost approach isn't what I think you'd be looking for.
Market value: Best way would be to run comps and find houses with ADU's in the area. It depends on so many different factors.
Income approach: I think this would be most appropriate for this situation. Take your yearly net income (rents - applicable expenses) from this ADU and divide by the appropriate cap rate. I don't know what area exactly that you're in but likely 5.25% to 6.25% for something brand new near downtown.
I'm a developer, hold my GC license and real estate license and we're building duplexes near downtown right now. Feel free to reach out to discuss if you'd like.