ADU income for debt service on new loan

[Oscar Miguel]

Hello everyone, I searched first but couldn't find any recent info. I recently completed a hybrid house hack-BRRRR-ADU build combo which I'm extremely stoked to say worked out almost completely to plan. I used a lot of information from BP, and even went as far as reading the new CA ADU bill, speaking with the congressman associated with it, educating both my architect AND the city on the new guidelines. It was super intense at times and definitely frustrating. But, overall everyone was open-minded and we worked it out. I think I submitted my design on 1/2/2020 as soon as I legally could. I've completed my primary home rehab, ADU build, and have a tenant in place. Now for the next move/challenge:

I want to start looking for my next house hack but heard from the broker I had originally used that they cannot use my ADU rental income for DSCR. I was wondering if anyone knows of loan products out there that are beginning to look at or accept this income for DSCR?

For any noobies: Research a ton and feel free to reach out to people nicely, you'd be surprised just how often people want to help. This was super complex for me and REI is definitely not my forte, but it all went relatively smoothly. Despite having a more than full-time job and other responsibilities. Just do it!

[Dan H.]

How did the appraisal associated with the ADU value the ADU? This is where most ADU additions have issues. They are typically the opposite of value adds in that they typically have a hands off cost more than the value added.

Your broker is correct that Fannie/Freddie are not to use the rent from the ADU. Other finance options typically have worse terms. It is one reason that leveraging under utilized zoning to add a unit is often a better option than the ADU addition (the appraisal associated with ADUs being the other).

You can always search for the other finance options (owner financing, rent to own, commercial loan, etc.).

Good luck