I typically see new investors looking for best cash flow areas. I thought I would share that with the new Calif ADU laws some might consider how that could increase cash flow with just a little homework and perhaps a few thousand in new investment. Here is one example of how 30K turns into $1800.00 a month or 6% by permitting an existing detached garage into a legal unit. My friend did this recently in the LA area and could add another on wheels of all things. Effectively turning a SFR into a Triplex sort of speak. Some might be able to take advantage of this so this post is to remind you, location really matters.

How do you think you might be able to take advantage of this new ADU law?

@Matt R. Makes tons of sense if you have an existing property and good financing to build! However, I'm not sure the real benefit will be there for R1 lots until we get reasonable appraisals on the ADUs. For now I see all of the opportunity in multifamily and adding units.

@Matt R. Hi Matt, thanks for sharing. Looks awesome. I'm a new investor in San Diego & my local connections seem to agree doing this as my first investment would be the best strategy. You are right, location is key. As advised to me, I'm planning to buy SFR with ADU potential in the SDSU area and rent to students. What other kind of locations would you suggest to take advantage of this?

Originally posted by @Matt R. :

I typically see new investors looking for best cash flow areas. I thought I would share that with the new Calif ADU laws some might consider how that could increase cash flow with just a little homework and perhaps a few thousand in new investment. Here is one example of how 30K turns into $1800.00 a month or 6% by permitting an existing detached garage into a legal unit. My friend did this recently in the LA area and could add another on wheels of all things. Effectively turning a SFR into a Triplex sort of speak. Some might be able to take advantage of this so this post is to remind you, location really matters.

How do you think you might be able to take advantage of this new ADU law?

You're assigning $0 of cost to the land. If you were to buy that land, and build that structure, you'd be sub 1%. or buy the home + ADU together and rent them both.

Originally posted by @Cody L. :

Originally posted by @Matt R.:

I typically see new investors looking for best cash flow areas. I thought I would share that with the new Calif ADU laws some might consider how that could increase cash flow with just a little homework and perhaps a few thousand in new investment. Here is one example of how 30K turns into $1800.00 a month or 6% by permitting an existing detached garage into a legal unit. My friend did this recently in the LA area and could add another on wheels of all things. Effectively turning a SFR into a Triplex sort of speak. Some might be able to take advantage of this so this post is to remind you, location really matters.

How do you think you might be able to take advantage of this new ADU law?

You're assigning $0 of cost to the land. If you were to buy that land, and build that structure, you'd be sub 1%. or buy the home + ADU together and rent them both.

There's also nothing in the calculation for the fact that the garage has been lost. I personally could never live in a house without a garage. It's a nonstarter for me. Nonetheless, for someone in a different situation it looks like it could pencil pretty well.

Originally posted by @Cody L. :

You're assigning $0 of cost to the land. If you were to buy that land, and build that structure, you'd be sub 1%. or buy the home + ADU together and rent them both.

True.  But, you can't buy the land by itself.  All that extra land is locked up in indivisible parcels - during a sale, the market assigns no (or, negligible) incremental value to the backyard land.  So, in a sense, it is $0 value and $0 cost for the land.

That said, I agree with your overall point - it's not a 6% investment because you've got these ignored sunk costs.  

Once you've purchased a ticket to the park, you might as well ride as many rides as you can.

@Justin R. "Once you've purchased a ticket to the park, you might as well ride as many rides as you can." 

Great way to put it.

Originally posted by @Cody L. :

Originally posted by @Matt R.:

I typically see new investors looking for best cash flow areas. I thought I would share that with the new Calif ADU laws some might consider how that could increase cash flow with just a little homework and perhaps a few thousand in new investment. Here is one example of how 30K turns into $1800.00 a month or 6% by permitting an existing detached garage into a legal unit. My friend did this recently in the LA area and could add another on wheels of all things. Effectively turning a SFR into a Triplex sort of speak. Some might be able to take advantage of this so this post is to remind you, location really matters.

How do you think you might be able to take advantage of this new ADU law?

You're assigning $0 of cost to the land. If you were to buy that land, and build that structure, you'd be sub 1%. or buy the home + ADU together and rent them both.

 

Correct, this assumes property for adu already exist and I hear ya. 

Originally posted by @Jennifer Sarmiento :

@Matt R. Hi Matt, thanks for sharing. Looks awesome. I'm a new investor in San Diego & my local connections seem to agree doing this as my first investment would be the best strategy. You are right, location is key. As advised to me, I'm planning to buy SFR with ADU potential in the SDSU area and rent to students. What other kind of locations would you suggest to take advantage of this?

Idk SD that well to advise exact locations. It is likely almost any location could work as SD is typically very strong generally. I guess the beach locations might have the best returns long run. Good luck!

Originally posted by @Jeff Cagle :

Originally posted by @Cody L.:

Originally posted by @Matt R.:

I typically see new investors looking for best cash flow areas. I thought I would share that with the new Calif ADU laws some might consider how that could increase cash flow with just a little homework and perhaps a few thousand in new investment. Here is one example of how 30K turns into $1800.00 a month or 6% by permitting an existing detached garage into a legal unit. My friend did this recently in the LA area and could add another on wheels of all things. Effectively turning a SFR into a Triplex sort of speak. Some might be able to take advantage of this so this post is to remind you, location really matters.

How do you think you might be able to take advantage of this new ADU law?

You're assigning $0 of cost to the land. If you were to buy that land, and build that structure, you'd be sub 1%. or buy the home + ADU together and rent them both.

There's also nothing in the calculation for the fact that the garage has been lost. I personally could never live in a house without a garage. It's a nonstarter for me. Nonetheless, for someone in a different situation it looks like it could pencil pretty well.

 

Adding a storage shed might be needed for many who do this. Otherwise one could rent a 2 car $100 to $200 ? Depends on location. Definitely not for everyone and certain houses could be more suited for privacy, storage etc. 

Originally posted by @Matthew Forrest :

@Matt R. Makes tons of sense if you have an existing property and good financing to build! However, I'm not sure the real benefit will be there for R1 lots until we get reasonable appraisals on the ADUs. For now I see all of the opportunity in multifamily and adding units.

I have not seen that happen as much yet although this might be a huge thing coming. It is my understanding one can convert a carport with multis. There might be a lot of construction going with these carports, and kind of changes the game of what is possible in multis too. I do know of one dude who is adding a SFR basically to his 10 unit in LA. It is a bigger deal, soil test, survey existing units, etc...multi year start to finish is my guess.

@Matt R. Can you add a home on wheels if you've got a detached ADU? Here in Fresno, you can only add one if the ADU is attached. I'm really pushing for triplexing SFR this way...converting the attached garage and then adding the THOW. I feel it's the best bang for the buck AS LONG AS you are focused on cashflow.

Originally posted by @Barbie Steele :

@Matt R. Can you add a home on wheels if you've got a detached ADU? Here in Fresno, you can only add one if the ADU is attached. I'm really pushing for triplexing SFR this way...converting the attached garage and then adding the THOW. I feel it's the best bang for the buck AS LONG AS you are focused on cashflow.

Idk the on wheels rules personally that well. My friend said he is allowed to add another on wheels. He checked and said the city said he could. I think it is state law now. I like the on wheels idea though. I have seen some ready made, these will rent like hot cakes in some areas. 

@Matt R. The THOWs have really come down in price. Realistically you can get one for $25-$35K now. And think about the SFRs that are already set up with RV hookups...

It's crazy how different your market is compared to Indianapolis. I have a friend utilizing an ADU but he actually lives in it above the garage. He AirBnB's the main house to afford the bills and cash-flow a little. It's a cool gig but not sustainable when you decide to start a family.

Originally posted by @Barbie Steele :

@Matt R. The THOWs have really come down in price. Realistically you can get one for $25-$35K now. And think about the SFRs that are already set up with RV hookups...

Yeah, I have even seen some under 20k that would work perfect. These can be made super cute now. Or if the location supports it, get the Cadillac one for 60-70k all in and rent for 2-3k. I imagine some 2nd hand ones in a couple years might be had and if you move it. Perhaps getting a $50k one for 10k from someone who wants it out or maybe just bought the property and wants more yard/privacy. I just saw a new we do ADU office open on a popular blvd... with huge signage. This might be a billion dollar Calif industry soon.

And it doesn't cost much at all to move the THOWs, because you can move them with a 1 ton pickup without permits. Not like the mobile/manufactured park model homes where there's permit fees, flagman fees, setup fees...etc

Interesting topic.Thanks on the THOW mention@Barbie Steele and @Matt R. If you have a link for a good source on those I'd appreciate it!