Accessory Dwelling in OC California - Is it worth it?

1 Reply

Hello BP Community,

I wanted to reach out and get opinions from local flippers/rehabbers who have done accessory unit additions in orange county california.

I have gotten quotes ranging from 150-200/sqft to almost 250/sq to build a new accessory unit and I am trying to dial in a better estimate to figure out what the cost/benefit might be and if this might be a deal.  My intention is to flip but I can also take on as a buy and hold.

Coming up with good comps is a little harder... as some properties have accessory units, some don't and some are zoned R2.  That being said, with properties with similar floor plans and accessory units I am seeing sales in the range of 850-895K in late 2017.  Single dwelling with smaller floor plans are 650-700K in 2016

Property under contract 620K

City of Orange

Directly across local university 

Zoned: R1

6000 sq ft

3bd/1ba - 1500 sq ft main dwelling

$2700 rent for main dwelling

main dwelling needs 50k of rehab on its own

allowed up to a 640 sqft accessory unit with an attached garage that does not count against 640 sq ft.

public access way available to accessory unit garage

$1800 potential rent for accessory unit

Have at it BP.  Would love to get schooled and see if there are things I still need to account for.

Mahalo,

Matt

Howzit, Matt.  Fun yeah, local kine talk. 

I'm in San Jose and have been researching ADUs too.  The lowest quotes I got start at $275sf so yours is much lower.  The upcharge here just because its the Bay Area.

To be "worth it" is almost a personal choice. For ADUs, consider the additional assessed property tax, and of course the initial upfront and holding costs. It may be better to rent out vs flipping for ROI. I'm not sure if the ADU would give instant equity above the initial capital investment. In this current rental market, you may have positive cash flow.

With the numbers you posted, to flip it looks like you're coming out with possible ROI. If you're in Irvine, I understand its a buying frenzy, even new construction townhomes with Mello Roos are being swallowed up. Crazy.

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