Realtor · Seattle, WA · Member since 2023 · 4 posts · 0 votes
Hello!
I'm a beginner investor looking to get advice on whether or not it is a good idea to build an AADU and DADU on our property in Seattle. Rent for the current SFR goes for around $2300 in the market and our plan with the two ADUs would be to rent them out and hold long-term.
It makes sense for developers to purchase an SFR and build two ADUs then condo each to sell - but in our situation, would building the ADUs to rent and hold make sense in the long run? What are other questions we should be asking ourselves? Thanks for your help!
Some investors prefer to build the DADU, condo it, sell DADU separately to get cash, and hold main house. (i.e. if you built for $300K-$350K, and sold for $650K-$750K on average, after subtracting some financing, holding,... fees, the difference will yield you a few hundred thousand, which will be great cash boost
Some other investors prefer to sell the main house (typically old) and keep DADU.
You can keep both, if you paid for DADU cash/Saving/....
Run the numbers for the three scenarios, and go with the option that makes the most sense
In my market the average cost for a detached ADU including permitting and bringing in utilities runs from $220,000 to $240,000. It is about $30,000 cheaper on an attached ADU.
There are a few local builders that do pre-fab ADUs and deliver in the Pacific NW. I did a consult with Wolf Industries. Wolf is based out of Battle Ground WA, and serve the whole west coast. They deal with the permitting offices regularly and were able to accurately estimate those costs for me. The consultation was helpful for me to properly calculate the costs for a detached ADU.
If I were in your shoes, I would evaluate each of your ADUs (the attached, and detached) like you would any other investment property. BP has the rental property calculator where you can factor in your loan cost, rent, expected income, etc. Then you can see when you would break even, and your future potential earnings based on the time frame that you plan to hold the property once your ADU builds are complete.
Dive deep into Seattle Landlord/Tenant law. Then look at Idaho Landlord/Tenant law. There's a big big difference. You might not see the problems of Seattle as a novice, but ask someone who's been in the biz 30 years. You'll get an earful. Who in their right mind would want to be a landlord in Seattle? That's what you should ask. The whole west coast is toast. Go inward.
Some investors prefer to build the DADU, condo it, sell DADU separately to get cash, and hold main house. (i.e. if you built for $300K-$350K, and sold for $650K-$750K on average, after subtracting some financing, holding,... fees, the difference will yield you a few hundred thousand, which will be great cash boost
Some other investors prefer to sell the main house (typically old) and keep DADU.
You can keep both, if you paid for DADU cash/Saving/....
Run the numbers for the three scenarios, and go with the option that makes the most sense
@Sherief Elbassuoni Thank you for your reply! We'll definitely take a look at the numbers. In our market, would you say that the long-term trend is moving towards lot size being more valuable in the city of Seattle with the new legislation to increase density? Also taking into consideration Henry's point regarding Landlord/Tenant law. That's another reason why we may consider keeping all as is but would love to hear your thoughts.
@Sherief Elbassuoni is pretty accurate. I am real estate appraiser in Seattle, and have done several appraisals for DADU's. Thats what I have seen most investors do from my appraisal experience.
I'm a beginner investor looking to get advice on whether or not it is a good idea to build an AADU and DADU on our property in Seattle. Rent for the current SFR goes for around $2300 in the market and our plan with the two ADUs would be to rent them out and hold long-term.
It makes sense for developers to purchase an SFR and build two ADUs then condo each to sell - but in our situation, would building the ADUs to rent and hold make sense in the long run? What are other questions we should be asking ourselves? Thanks for your help!
Hi Michael! I'm currently in the process of building my own DADU right now. We're projecting to exit around $800k or so when finished. Our plan is to live in the DADU for 2 years to get the cap gains exemption & save a bunch on taxes when selling in the future. (Note: our DADU is a 3 bed 2.5 bath build).
I think it does make sense to buy & hold as rentals as well. If you look at the 1% rule, if you're able to build at $300k and then rent ~$3k or so, you should be able to cash flow even after pulling out most of your money.
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