Minneapolis has loosend it's zoning laws for the purpose of population density and to supply more housing and one of those ideas is to allow attached, remodeling basements and attics and detached ADU's. I've been working deligently with a architect drawer and a landscape designer and have submitted dimensions and site layout drawings, floor plans, along with a permit to build and a permit to build an ADU in the back of my property following all of their setback and distance to primary home, which is a duplex with two units and has been rented since 2014. The city allows a footprint of no larger then 676 Sq feet and some height restrictions. My design is a two story, 1296 square foot, two bedroom, 1 bath and a single garage stall backing up to an Alley, with room for parking. Getting through the red tape has been interesting, but I'm learning. My conservative estimates have me building this ADU at 160k, rent in the area for a brand new, two bedroom, 1 bath with laundry, puts rents somewhere between $1,400 and $1,500 a month. The location is in South Minneapolis, where I've had a lot of luck renting my other tenants, a very desirable area. So, just waiting for the City to review my plans and hopefully it gets accepted.
Being that I've never built anything in my life, some of the questions I have is how to finance this being that it's another building on the same land as my duplex. I owe $152,00 on this duplex that's worth anywhere between $300,000 and $350,000, so the cash flow has been great for me. I valued added this building in many ways, by putting a door on the lower unit so that both units had access to the basement for laundry and locked storage. I also remodeled the upper unit back in 2015. Both value adds have allowed me to rent both for a total of $2,400 a month. The current loan is on a 15 year @ 2.75%. I spoke with my Credit Union and they have never financed anything like this before, so because I've been a member there for over 40 years, he assured me we could come up with something creative. Does anyone else here have some ideas on how best to finance both of these properties that are on the same land?
Lastly, on the same Alley there is a house 3 doors down that built a similar structure on their land, so I went over to introduce myself and they showed me the Garage with an office unit above. Their structure isn't considered an ADU, because no one is living in it. They paid $54,000 for their structure. They gave me the builders name, so I plan on calling them to get an estimate on the cost to build my ADU. Does anyone else have advice on some good GC's in the Minneapolis area? I plan to build next year if everything goes well.
You could cash out refinance now and get start money. There isn't a conventional construction product for this yet, your financing options will be expensive. There are kit manufacturers who offer financing which means your architectural drawings get scrapped. Did you take your proposal to the planning desk to see what they say? Avoid planning forcing you to get a conditional use permit or re-zone hearings which take time and neighbors can block you. ADU law in most states is very loosey goosey and many planning departments don't worry about a granny flat conversion or small ADU and okay stamp them. Your city/county, shrug, I don't know what the temperature there is about moderate housing - California just passed a law this week giving ADU's open season. Since homelessness and few low mod housing options exist in the US I expect more states to follow, our Federal government to come up with some loan programs and better choices ahead...
Yes, my banker was mentioning cash out refinance as an option, being that I have a lot of equity in the duplex. I also have 30k in cash and am saving 2k a month to apply towards the project. My end goal once this is done is to save up for one more multiplex and then really pound down these mortgages. I am 50 right now and want to quit my current W2 job before I'm 60 and have financial freedom.
I own 2-4 unit rentals and am a general contractor who done renovations on dozens of existing rentals I've bought and have done ground up triplex builds. Not trying to be a downer but I'm finding your number of $160K a very, very low build estimate. I will follow if you are willing to post what your bid comes in at. I'd wait on getting final details on financing until you get that bid as you will most likely be surprised.
160k was just a pure guess, I have no ide until get a bid. So you’re suggesting I get bids now? If I sent you my site plan and drawings, would you be able to give me an estimate. Lastly , how is garage space estimated versus living square footage.
I only work on my own projects so I wouldn't be a good person to look at your plans because I don't include profit in my personal builds/renovations and don't have overhead/marketing costs that a general contractor/builder needs to include. I just know what it cost me to build/renovate. You are using $125/sq ft for construction. Building a SFH, which is really what an ADU is, should be $200-$250/sq ft. This is why I advise talking to your neighbors GC/builder to get a rough idea before spending more time looking for financing. I hope this helps.
@Marcus Johnson -the garage is considered part of the total allowable 1300 sq ft in MPLS. It is considered part of the accessory structure.
Thank you so much for your advice, I called the builders and set up a meeting next week to get an estimate.
@Marcus Johnson is there a reason you don't cash out refinance your property and purchase another duplex in your area? Based on your projected numbers, you could get similar return, and your appreciation on separate property would be better. That's not to mention it would be a fraction of the effort.