Large lot SFH in Transit Priority Area vs Residential Multi-family ( duplx, tri, quad
With San Diego's recent increase of Transit priority area, from 1/2 mile to 1 mile of a transit stop, most of city is now within a transit area. If you have a SFH with a large lot, and are okay with building low income housing, you can build quite a few ADUs, depending on the F.A.R, lot size, exact RS1-X zoning, etc.
How would you compare a SFH home with, for example, 9 ADUs ( 4 low income, 5 market priced) vs an 8 plex? If you can build at $250/ft, you could build 9 600sq ft units for 1.35M+ SFH cost. Finding an 8 plex for under 2.5M+ is hard in san diego. You would have a SFH zoning with a commercial loan likely.
What are the pros and cons of this approach vs buying a RM zoned multifamily and building ADUs?
Hey Alex,
I would think an agent/broker is better qualified to answer this question than I am, but one of the primary challenges you'll face is the appraisal. The ADU world doesn't have nearly the data set of comparable properties to provide good information, whereas a multifamily 8-unit will have plenty of comps. So your appraised value becomes a massive variable during the planning phase.
Any agents/brokers, feel free to correct me if I'm wrong here.
Thanks, Joshua, I think that is a great point. My understanding is with 4 or fewer units, comps are used, wheras with 5+, cap rates are the measure. With that said, if you are able to build 4+ units in a SFH zoned property due to these new permitting rules, what is the correct method to be used by appraisers for valuation comps/caps?
Most importantly, the question is will investors, start building ADUs on SFHs or stick to buying traditional multi-family zoned investments?
