Build ADU condo to rent or sell in East Austin, TX
We have a property in Central East Austin — very accessible to Downtown, UT, and the new Dell Medical School. We've owned the property for 15 years and recently paid off our mortgage completely.
The original 2br house was built in 1930 and we've preserved the original exterior. We are pursuing historic designation, which can take a huge chunk off of the property taxes. This does not preclude us from building an addition, so long as it is sufficiently discernible from the original structure. We're planning to take off a non-original back porch and replace with a 3rd bedroom/office and second bathroom.
We've also asked the architect we've engaged for this addition to do a feasibility report and design that includes an ADU at the back of our lot. It's an 8,200 sqft corner lot with alley access, so it's a legitimate candidate for a second unit according to local permitting/zoning standards. We'd like to build a modest 2br home on the other half of the lot. We might then rent it, but also thinking of selling it as a condo in the near future in order to be debt free or use the cash for another investment.
I'd love feedback:
- Does this sound like a sound idea?
- Any advice on whether it would be preferable to sell as a condo immediately (or soon) after construction vs becoming landlords and putting the rent towards the construction loan?
- I am having a hard time estimating what the cost for construction might be, but since we own the land and are not intending to do fancy finish outs, I'm hoping that the addition + ADU can come in under 200k. I arrived at that from lots of Googling to find $150/sqft a reasonable price and assuming the house would be 1,100 square feet. We only have 20k/10% to put towards a down payment — would that be insufficient for this type of loan?
Thanks in advance for any advice!