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Western Washington kitsap , mason county investing
I currently live in a pretty hot market and getting more expensive by the day most houses exceed $325,000 I don't think that's good rental investment although I'm brand new to this investing. But my question I have for the forum is if I'm renting out my property and making about substantial cash flow $900 a month currently .should I convert the shop on the property to a ADU 2 bed 1 bath do all the construction myself and they are renting for about $1600 . Or should I save my money and invest in already built property . Thanks everyone
That's a really tough question to answer. What are your goals? Does building an ADU bring you closer to achieving your goals or keep you on path towards your goals? What will it cost to build your ADU? Is there a strong demand in your area? How long will it take you to build your ADU and start earning money? How long will it take you to see a return on your investment? What will will your CoC be? Take a peak at your goals and answer some of these basic questions. It may help you find your answer.
I know WA state, as a whole, is becoming more ADU friendly and especially so on the west side of the mnt but you really need to check with your local codes. There are a lot of requirements that come along with an ADU. Just because you have a garage you can convert doesnt mean it would meet all the codes. I would go into your local planning department and ask them. They will usually go over the code and tell you what is allowed for YOUR specific lot and how to get it compliant.
Another thing to consider is financing. I dont know about banks on the west side but over here on the east side I would bet that it would be very difficult to secure a typical loan for just an ADU. Main reason being its probably going to be too small of an amount. You might have to look at doing a line of credit or some other type of loan.
I appreciate all the feedback thank you!
Hi @Jonathan Gragg. You're in a great area and an ADU will definitely add value to what you have, and I don't think you'll have any problem renting it out. Your issues will be related to permitting and timing. Typically you'll be limited to 800sf for an ADU (check with your local building department. they are usually very helpful and can give you some upfront parameters). If your existing building can be made to conform to code and If your able to do the majority of the work yourself you can obviously save a lot of $ -assuming you can do it in a timely manner and get it occupied. If you are doing financing they will place it on the property as a whole and not just the ADU.
Good luck! Welcome to the game!
@Jonathan Gragg, In regard to your question of,
- "Should I convert the shop on the property to a ADU 2 bed 1 bath do all the construction myself and they are renting for about $1600 . Or should I save my money and invest in already built property."
Run the numbers for both. I highly recommend using the BP Calculators, like the Rental Property Calculator, and Rehab Estimator Calculator.
https://www.biggerpockets.com/real-estate-investment-calculator
Once you have an idea of the return from building out the ADU, it will be possible to rationally compare those figures to the return available from properties in your local market that meet your investment goals.
Having multiple income sources from the same location does have some time saving, convenience and other management advantages. So I would look carefully at how the ADU figures come out. Best wishes