Hello! I currently live in a 1,000 sq ft home on a 7,000 sq ft lot in San Diego county. I am building a 1,000 sq. ft ADU in my backyard. The appraiser from the bank lending me the money for the project said my home would increase in value from $850k to $1.1 million once the ADU is put in. Does this sound correct? I thought my property would increase in value more than that; especially if an investor were to buy it.
Thank you in advance!
Hello! I currently live in a 1,000 sq ft home on a 7,000 sq ft lot in San Diego county. I am building a 1,000 sq. ft ADU in my backyard. The appraiser from the bank lending me the money for the project said my home would increase in value from $850k to $1.1 million once the ADU is put in. Does this sound correct? I thought my property would increase in value more than that; especially if an investor were to buy it.
Thank you in advance!
This is a much higher valuation than I typically am hearing about in single family zoned areas of San Diego. $250k valuation would be the highest I would have heard about on an ADU addition in single family zoned area for a refi appraisal. This likely would come close to the cost of a ground up 3/2 ADU addition which is rare.
It still would not alleviate the other issues with an ADU addition such as revenue out long (often many months) before any incoming revenue, the worse financing associated with the ADU, that it likely makes your primary a rent controlled unit, that it detracts from the primary even if it is just yard, that adding an ADU addition is work (likely more work than a BRRRR with much lower returns), etc
Can you post the valuation you receive when you receive the appraisal?
Good luck.
Hello! I currently live in a 1,000 sq ft home on a 7,000 sq ft lot in San Diego county. I am building a 1,000 sq. ft ADU in my backyard. The appraiser from the bank lending me the money for the project said my home would increase in value from $850k to $1.1 million once the ADU is put in. Does this sound correct? I thought my property would increase in value more than that; especially if an investor were to buy it.
Thank you in advance!
This is a much higher valuation than I typically am hearing about in single family zoned areas of San Diego. $250k valuation would be the highest I would have heard about on an ADU addition in single family zoned area for a refi appraisal. This likely would come close to the cost of a ground up 3/2 ADU addition which is rare.
It still would not alleviate the other issues with an ADU addition such as revenue out long (often many months) before any incoming revenue, the worse financing associated with the ADU, that it likely makes your primary a rent controlled unit, that it detracts from the primary even if it is just yard, that adding an ADU addition is work (likely more work than a BRRRR with much lower returns), etc
Can you post the valuation you receive when you receive the appraisal?
Good luck.
Hello! I currently live in a 1,000 sq ft home on a 7,000 sq ft lot in San Diego county. I am building a 1,000 sq. ft ADU in my backyard. The appraiser from the bank lending me the money for the project said my home would increase in value from $850k to $1.1 million once the ADU is put in. Does this sound correct? I thought my property would increase in value more than that; especially if an investor were to buy it.
Thank you in advance!
This is a much higher valuation than I typically am hearing about in single family zoned areas of San Diego. $250k valuation would be the highest I would have heard about on an ADU addition in single family zoned area for a refi appraisal. This likely would come close to the cost of a ground up 3/2 ADU addition which is rare.
It still would not alleviate the other issues with an ADU addition such as revenue out long (often many months) before any incoming revenue, the worse financing associated with the ADU, that it likely makes your primary a rent controlled unit, that it detracts from the primary even if it is just yard, that adding an ADU addition is work (likely more work than a BRRRR with much lower returns), etc
Can you post the valuation you receive when you receive the appraisal?
Good luck.
Hello. The valuation is only for $37k. However, I'm really interested in what an investor would be willing to pay for it given they can rent to 2 different families
Hello! I currently live in a 1,000 sq ft home on a 7,000 sq ft lot in San Diego county. I am building a 1,000 sq. ft ADU in my backyard. The appraiser from the bank lending me the money for the project said my home would increase in value from $850k to $1.1 million once the ADU is put in. Does this sound correct? I thought my property would increase in value more than that; especially if an investor were to buy it.
Thank you in advance!
Hey I am currently going through this process and I can give you some pointers on assessing the future value of the build. The tricky thing will be looking at the closed comps in your are and if there are ones to use. Appraisers sometimes have issues finding comps in the area that match your new comp because Adus can be so unique.
One of your problems is probably that owner occupants will usually pay more than investors, a lot more. So let's say an investor would pay $700k for your home and owner occupant would pay $850k. Then you add the the ADU and now the owner occupant and the investor would both pay $1M or even $1.1M. You gained $300k from the investor, but he was the low bidder.
When you see an appraised value, that's for an owner occupant, not an investor. The investor is going to want a 15% discount or more. Some way to increase the value or the rent. No investor is paying $850k for a 1,000 sf house. If they put down $170k the payment will be over $5,000. They'd have to get $5,500/mo to break even with a zero COC for the $170k down. They'd make a better return putting the money in the bank.
TLDR: Go ahead and do it at your property if you want/need one for a personal reason and hope to break even financially when you want to sell. They’re like pools. Attractive to some, a turn off to others. But rarely appraise for over cost.