Updated almost 5 years ago on . Most recent reply
Adding ADU to a duplex in California
Hey everyone,
So my first attached 488 sq ft ADU project on my SFH went great. Spent 35k (before 2020 when permit fees were decreased) and it added 60k of equity on my property. I am planning on buying an owner occupied duplex to brrrr in a relatively high market and was thinking about adding an ADU. Since multifamilys are valued based on income, would a duplex with an attached ADU be appraised like a triplex? The cost would be about 50k for a 2bed 1 bath 749 sq feet in a market where it will easily rent for $1800 per month. I am also aware that I can add a 2nd ADU on a multifamily, but it will cause lending issues when it comes to refinancing or selling. Im a buy and hold guy, so cash flow is my priority, but I would like to refinance and pull out all the cash invested in the ADU(s) and repeat with another owner occupied loan after the 1 year occupancy. For anyone about to say that 50k is a unrealistic number, I am an owner builder, do most of the work myself and only hire out a few parts for the labor.
Most Popular Reply
Listen to @Dan H. he hit the nail on the head!!!
Also @Jonathan Taylor was spot on, investors are not seeing the resale value they assumed they would get on ADUs.
One of my clients purchased a SFR with ADU and the appraisal came in $30k short, I shrugged my shoulders, we reappraised and it came in less (miraculously) and got a $25k price decrease.
I told the appraiser for my recent SFR purchase about my plans to build an ADU there and he looked at me and said "I didnt know they would let you do that." I laughed and told him "yeah, and they will let you appraise it."