Accessory Dwelling Unit Houshack in Austin Tx

Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes

It appears the only way to make a househack work in Austin is to build an Accessory Dwelling Unit in the backyard. Prices are very high for anything with 4 miles of downtown.

I'm thinking buy a rundown house in east Austin rehab it and add an ADU to the back. This should create enough rent to cover the mortgage and still be a viable investment once I move out. Maybe section the ADU off and sell it under condo regime.

Has anyone else out there done this?

Any experience with ADUs and the city of Austin?

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David IvyPro Member

Real Estate Broker · Austin, TX · Member since 2016 · 352 posts · 699 votes

Originally posted by @Caitlin Bigelow:

Can someone please explain to me how the condo regime in Austin works? is this a lottery system, or quota based? How do you qualify? I'm interested from the standpoint of an SFH + ADU.

You could reach out to @Patton VanVeckhoven or @William Smith for details. Both are attorneys in Austin specializing in condo conversions. It's not a lottery or quota system. As I understand it, a small condo conversion (e.g., SFH + ADU or attached duplex) is done in Austin via executing the right legal documents and has nothing necessarily to do permitting or the development code. It's just a change in ownership structure and, as far as I'm aware, doesn't require approval from any outside party or stakeholder. That said, the details can still be complicated. So, again, I recommend talking with an attorney in Austin who does many of these conversions about your particular situation or plans.

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Jacob Pereira
Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes
9y
Within four miles of downtown, it's pretty close to impossible to cashflow, even with an ADU, unless you find the steal of the century, or you're looking into larger commercial deals. I've never built an ADU myself, but I've looked into it for my closer properties, and as of now it only seems to make sense for people who have lived there long-term, or those who aren't actually looking to make a profit and are simply looking for extra income to pay the mortgage.
Between permitting, plans, and construction, even a modest ADU will cost in the six figures, so factor that into your plan. There is an argument for AirBnB, but I'm not as familiar with that business model; perhaps someone who is could comment further?
My personal model is to buy up fourplexes on the East side. They cashflow from the start, and appreciation is still decent. There are plenty over here that have been mismanaged for years and are ripe for a good househack, provided you're willing to put in the "sweat equity" and willing to live in a lower-income area. I'm also almost 8 miles away from the heart of downtown, so keep that in mind as a factor.
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Aidan Mosher
Lender · TX · Member since 2014 · 28 posts · 16 votes
9y
I am in agreement with Jacob on the cash-flow issue. Renting these type of properties can be an interim solution, but shouldn't be your primary goal. I find that there are plenty of opportunities for this type of Rehab+ADU strategy in East Austin, but the most profit can be realized by quickly building and flipping.
The most important aspect in these deals is staying out of trouble with the city. Make sure you have a contractor/builder who knows the building code backwards and forwards, otherwise you risk taking down an expensive property without being able to execute your strategy.
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Christian Ruiz
Austin, TX · Member since 2014 · 15 posts · 4 votes
9y
Disclaimer: I'm relatively new to this, but have done quite a bit of research on ADU's.
Like @Aidan Mosher mentioned, there are a lot of intricacies with building ADU's. I came across a property that had an existing structure in place that needed to be finished out to make it a habitable ADU, but it was built too close to the property line to make it work(I believe you need at least 10' on each side).
I'd make sure whoever you hired to put the structure in place has done a few and knows all the regulations.
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Joseph Weisenbloom
OP
Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes
9y
Yea I'm looking at this is an investment and a personal residence. I found a few that seemed like they would make sense from a cash flow perspective but it definitely is slim pickings. I'm thinking it may be easier and cheaper to use some type of prefab home or tiny home. Building and flipping don't appeal to me I'd rather this be a rental.
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Jacob Pereira
Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes
9y
Joseph, I took a quick gander at your profile, and I'm a bit confused; are you looking to househack, or looking for an investment property where you won't live? Provided you're willing to sacrifice a few creature comforts for a year, the former is almost impossible to screw up. The latter is a bit harder. Either way, if you're not afraid of a rougher neighborhood, I'll give you the same advice I give everyone in Austin: Buy one of the mismanaged fourplexes in the Lakeside area (78724). You can build instant equity by cleaning out the trash, painting, and upping everyone's rent to market rates. @Christian Ruiz can testify that I try and talk everyone into it, albeit partially because I'd also benefit from better local ownership.
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Joseph Weisenbloom
OP
Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes
9y
@Jacob Pereira I am looking at this as a househack. I would use owner occupancy status so I can get 5% down and then move out after 1 year. Then I can keep it as a rental. I will take a look at that neighborhood.
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Charlie Chung
Burlingame, CA · Member since 2016 · 29 posts · 22 votes
9y
@Joseph Weisenbloom @Christian Ruiz @Aidan Mosher,
I am investing in a small house development company in Austin--these guys have done it and put a 399 sq ft. park model home behind a house, tied down, hooked up to utilities, and fully permitted. Rule of thumb is you need at least a 1/3 acre lot for this size of ADU, and the total all-in cost can be <$80K for something very nice.
If you get financing, it could be a low cost way to house hack, but probably only makes sense if your main house can garner a high rent--so I'm not sure if it would work in east Austin. If you're interested in seeing the demonstration ADU, PM me and I'll put you in touch with them.
-Charlie
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Aidan Mosher
Lender · TX · Member since 2014 · 28 posts · 16 votes
9y
I am definitely curious to see this, but when you say "tied down" I'm guessing this is a mobile home? It is extremely difficult to find land in Austin that allows for mobile homes.
Joseph, for the most part, ADU's in Austin must be on lots over 5,750 square feet and can be no larger than .15 of the total lot size (FAR).
https://www.austintexas.gov/page/adu
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John Arendsen
Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
9y
@Charlie Chung. Interesting that Texas allows the use of Park Models as an ADU. In Cali they are not allowed; at least not right now. They are classified as an RV and as such are not technically even a Manufactured Home let alone an ADU.
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Eddie Lehwald
Investor · Austin, TX · Member since 2016 · 29 posts · 12 votes
9y
@Jacob Pereira I'm curious about these Lakeside fourplexes of which you speak! I just took a quick glance online and didn't spot any. How have you found them in the past-just looking around and knocking on doors? All I know of the area is that big manufactured home park on Daffin Ln and the Agave thing off of MLK.
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Joseph Weisenbloom
OP
Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes
9y
@Jacob Pereira @Charlie Chung @Christian Ruiz
I'm thinking a pre-fab house would be quick and easy to put down in the backyard if there is enough square footage. After that it's just hook up utilities and ready roll. Anyone know if there are pre approved site plans from the city that would be easily permitted?
I think I'm going to call into city hall tomorrow and ask around.
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Christian Ruiz
Austin, TX · Member since 2014 · 15 posts · 4 votes
9y
I'd be interested to hear what you find out. Let us know
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Jason Pavloff
Austin, TX · Member since 2017 · 34 posts · 7 votes
9y
Just for the record you can get into an owner occupy multifamily Duplex with just 3.5 down.
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John Arendsen
Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
9y
@Charlie Chung, Curious to know how many ADU purveyors/builders/contractors there are in and around Austin. I'm thinking about expanding into that area myself. Do you think there is adequate demand for them?
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David Forester
Austin, TX · Member since 2017 · 6 posts · 2 votes
9y
@John Arendsen @Aidan Mosher @Jacob Pereira
The ADUs in my area (78756) typically sell within a week. They range in size from 830sf to 1100 sf and are sold at around 370$/sf to upwards of 415$/ft They are mostly being constructed by the same group, per the city permitting records, and are listed on the MLS . They don't even bother putting up photos on the listing. They've got a design worked out that they modify slightly to fit each site. They are all typically constructed in the back yard of interior lots, and then sold off as a Unit B in a two-unit condo regime. Part of their pro forma is obviously the hit on value of the "left-behind" existing unit A home, which now has no backyard. I am currently in the planning process for a similar product so I can probably answer some questions if you are still investigating this process. I may start a new thread on this topic if this does not bump.
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John Arendsen
Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
9y
@David Forester That's very astute information and interesting demographics on Austin. In many ways Cali has finally seen the light with SB 1069, AB, 2299 & 2406 going into effect as of 1/1/17. I'd very much look forward to your contributions as this is but a mere cottage industry (pun intended). We've been in the Factory Built Housing Industry (HUD Manufactured, Modular & PREFAB) and have been designing and building these types of structures for the past three decades. Love to hear what you have to say.
Until then,
I bid you ADU! tm
John
You can PM me anytime and I'd be happy to send you some posts we've done and projects
currently in progress.
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Joseph Weisenbloom
OP
Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes
9y
@Jacob Pereira @Christian Ruiz @Charlie Chung @John Arendsen
I have an update for this forum. I just purchased a 4bd/2ba fixer upper in east austin with a backyard large enough for a second unit. I plan on renting out the individual rooms and ADU in the back. We just started the rehab today. If all of my projections are correct this will be a very successful house hack. I will keep the forum updated.
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Jim Robertson
Investor · Austin, TX · Member since 2014 · 102 posts · 41 votes
9y
@Joseph WeisenbloomSaw this thread the other day and found this event through a friend. Might be worth your time, while you're in the planning stages.
GREENING YOUR VINTAGE HOME: GROWING WITH ADUS 6PM TO 8PM
PRESERVATION AUSTIN - 500 CHICON, 78702
$25/MEMBERS, $35/NON-MEMBERS
LIGHT REFRESHMENTS PROVIDED
https://www.preservationaustin.org/events
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David IvyPro Member
Real Estate Broker · Austin, TX · Member since 2016 · 352 posts · 699 votes
9y
@Joseph Weisenbloom
It was so satisfying to get that one done! That was a transaction I won't soon forget. Definitely keep us updated.
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Joseph Weisenbloom
OP
Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes
9y
@John Arendsen @Jim Robertson @David Forester @Jason Pavloff @Christian Ruiz @Eddie Lehwald @Charlie Chung Thanks again David. If anyone needs an agent in Austin I would recommend @David Ivy
We had a 4 month long battle with the lender and seller to get this deal closed. David was very helpful along the way and I could not have done this without him. If anyone out there in the Austin area is looking for an agent that knows how to work with investors David is the man.
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David Forester
Austin, TX · Member since 2017 · 6 posts · 2 votes
9y
@Joseph Weisenbloom
What are your plans for the ADU? How much developable area are you left with back there with the setbacks
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Steve K.
Denver, CO · Member since 2017 · 265 posts · 234 votes
9y
@Joseph Weisenbloom, @Jim Robertson
I just followed that "Austin Preservation" link. I was curious why putting RV's into historic Austin is an act of "preservation". Why does City Council encourage that density and emphasize "sustainability"? Why not require new buildings to look nice, in keeping with the neighborhood?
(I ask because I think I see this creeping into Denver.)
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Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
9y
Jacob Pereira what are you picking up fourplexes for on the east side? I'm moving down that way next year and need a place to house hack.
[email protected]512-888-9122
The Moorhead Team5140 Reviews
Website View Page
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Margaret Baylin
Austin, TX · Member since 2017 · 3 posts · 1 vote
8y
@David Forester Do you know if these Unit A/Unit B two-unit condo regimes have separate water meters or are they on the same meter?
I'm building an ADU in East Austin and trying to determine whether it's worth the extra $$ to have 2 meters instead of one+submeter.
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David Forester
Austin, TX · Member since 2017 · 6 posts · 2 votes
8y
@Margaret Baylin
I believe they have separate meters installed. You can go to the city permit search and see the applications if you have an address. The meters sizes and install are on the app
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