Is a garage conversion ADU worth it in Orange County CA?

Question

Hey guys, I recently just bought a small 3/2 house in Huntington beach. I'm debating whether or not it is worth doing a garage conversion ADU.

How much rent would I lose if I do a garage conversion for the main house?

Does anyone have experience?

Peter Mckernan · Answer

Hey @David Chan good question and there are somethings to think about, configuration on the lot, is there another access point (backside to an alley), and comps in the area. If there are no comps you will not be able to get a true value out of the property (these values on upside are easier the more years we build ADUs and in LA County). The access point is for having tenants not right on each other due to them possibly walking next to a window of the main house when leaving that would be a drawback which would indicate a reduction in rent (rent you can get for your main house and ADU). Configuration of the lot goes back to the second point, you would not want to live on top of one another (this will turn into reduction in rent & value).

OC you are looking at about $300-$350 per SF to build (this is for ground up and addition to detached garage), if you are doing this on an attached garage in the same footprint as the current garage there will be less cost. We just got an ADU permit approved and it took 10 months and about $12,000 just for structural/engineering costs with city fees. We have not broken ground yet.

Bruce Woodruff · Answer

Before you go too much further, I'd stop by your city Building Dept and ask them if it is possible. My experiences in SoCal were that you generally cannot convert a garage to living space. Wrong concrete PSI, wrong steel pattern, no vapor barrier, etc.....we usually had to tear down and build new. Which is not horrible, it is just going to cost more than you are thinking...

Rick Albert · Answer

In Los Angeles, I have one ADU property. I have a client that has 3. In our experience, we never had to provide a discount for the main house. Inventory is so low that people didn't have a choice. In Huntington Beach, it is very family oriented. Look at comps and make sure the design the ADU to have as much property as possible.

Joe Homs · Answer

@David Chan the best way to look at this would be cash flow and pay-back period.  For example if it cost you $100K and you are getting $10K a year in rent, then it would take you 10 years to pay yourself back for this investment.  Is this too long for you?  Only you can make that decision.  If you think that you can sell your home for $100K more after you finish the ADU, then think again.  Reach out to @Rafael Hoefel Pozas who may have some better numbers for you.

Good Investing...