Need some advice

[Sergio Garcia]

I'm from California close to San Luis Obispo We are finalizing paper work for a 750000 house .23 acre. Thinking of building an ADU but my concern it's that it has asbestos it's from 1959. Should I be worried or am I just being paranoid.

[Dan H.]

Quote from @Sergio Garcia:

I'm from California close to San Luis Obispo We are finalizing paper work for a 750000 house .23 acre. Thinking of building an ADU but my concern it's that it has asbestos it's from 1959. Should I be worried or am I just being paranoid.

 Almost certain to have asbestos.   Abatement is costly but simply part of doing work on 1940s to 1970s homes.

The bigger issue is do you recognize in most areas ADYs add less value than they cost to add hands off. This makes them value subtracts versus value adds. This results in an initial large negative equity position. NAR recently pulled its ADUdata on the premise that it was old I believe they pulled it because the numbers showed in most cities adding an ADU is a horrendous investment and this narrative is not in NAR's best interest.

With a house built in the 1950s, you house will be rent controlled if you add an ADU.

Here is a list of why adding a single ADU in single family zoned areas in my CA market is typically a poor RE investment:
1) The value added by the ADU addition is often significantly less than the cost of adding the ADU. Search the BP for ADU appraisals to encounter numerous examples. This creates a negative initial position. This negative position can consume years of cash flow to recover. Make sure you know the value the ADU will add to the property before building the ADU.
2) the financing on an ADU is typically far worse than for initial investment property acquisition or is often not leveraged by the ADU (HELOC, cash out refi, etc). Leverage magnifies return.
3) The effort involved in adding an ADU is comparable or larger than a rehab associated with a BRRRR. However if I do a BRRRR I can achieve infinite return by extracting all of my investment. Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).
4) Adding an ADU is a slow process. It can take a year or more to complete an ADU. During this time you are not generating any return from the money invested in the ADU. This amounts to lost opportunity because if you had purchased RE, at the closing it can start producing return.
5) ADUs detract from the existing structure whether this is privacy, a garage, or just yard space.
6) this is related to number 1, but there are many more buyers looking to purchase homes for their family than there are RE investors looking to purchase small unit count properties. This may affect value or time required to sell.
7) Adding an ADU does not make the property a duplex. For example in many jurisdictions I can STR units in a duplex but cannot STR an ADU (some jurisdictions will let you STR if you owner occupy). Duplex have different zoning that may permit additional units. Duplex can always add additional units via the ADU laws.
8) Related to number 1, purchasing a property with an existing ADU is cheaper than buying a property and adding an ADU. Why add an ADU if it can be purchased cheaper?
9) adding multiple ADUs or adding an ADU to a quad looses F/F conventional financing. This reduces exit options and affects the value. The first part of this may have recently changed (someone indicated it had changed but I have not verified it).
10) Small number of small units is the most expensive residential development there is. This implies residential units can be built at lower costs and provide better return than building a single ADU.
11) adding an ADU to SFH can make the SFH fall under rent control. In CA currently only MF properties are rent controlled. If the house is older than 15 years old and an ADU is added, it can become rent controlled. Rent control laws are market specific. Make sure you know the impact that adding an ADU will have on any rent control.
12) investors seldom include the land value in the overall ADU costs. The reality is the land has value.

Best wishes