Granny Flat in Los Angeles

[Steven Weiss]

Hi All!

I currently have a rental property in Los Angeles, CA. The single family house is currently being rented for approximately 4800. I want to convert the garage into a granny flat with a 1bedroom/1 bathroom and kitchen, but I have been doing some research and have been finding possible tax issues. I have the following concerns:

1. The house is 1500 square feet, if I convert the granny flat into a 1/1 and charge 2500 rent, how much would this affect reassessment for taxes? This is a big concern for me because I currently pay lower taxes due to the proposition, but I do not want to have the whole property reassessed for value. 

2. I've read that the assessor will only assess the ADU for value and 1-1.25% of that would be added to my taxes. However, what situation would draw an assessor to reassess the entire property (ie the house and the ADU together) for tax purposes?

3. I really wanted to highly consider doing this, as doing calculations if receiving 2500/month rent (1/1's in in the duplexes in the area are going for 3100 average, and if the ADU tenant only has street parking I figured 2500 would create incentive), I would come out ahead, even with the tax reassessment. However, have any of you had issues with your SFR rental tenants butting heads with tenant/s in your ADU? What were your experiences?

Thank you all for your feedback / opinions!

[Walter Roby jr]

I think your best bet is to consult with the Tax Assessor to find out what exactly will be reassessed.