Calif’s new granny unit law & ADU flips: is CA the next Portland?

56 Replies

Looks like some new legislation is in the works for California:

I am working on refinance of my single family home with an recently developed ADU unit in the bay area that cost little more than 300k to build and the appraiser only added 75k in value for the in law unit

The ADU unit is detached 2 bed/2bath/loft/kitchen with its own address and pge meter. rents for $2500

Is that a norm in the bay area for ADU properites or the appraiser had no clue on what he is doing.

If this is true then practically I lost money and 2 years of my time to get the design/approval and construction done and it looks like adding ADU does not make any sense in the bay area.

appraiser was clueless.  Have San Ramon rents dropped that low? Back in Pleasanton a few years ago $2500 got you a small 1bedroom.  

Still, a 10% return isn’t bad.  Should more than cover the payment but on the peninsula that same 300k unit would get closer to 4K a month.  

@Mike V. I could have got couple hundred more in rent. just did not do enough research.

I am more worried if I have to sell this house soon, in that case if we run into a similar appraiser, it would be hard for buyer to get loan. I was reading about  income capitalization approach for valuation which is more common in portland, I hope they bring that here as well.

@Account Closed I live in Oakland, IMO it appears you OVERPAID to build that unit!!! It's not the appraisal that is the problem, if you built a 1200 sqft unit it was @ $250/sqft vs $150 or even your own labor. My neighbor converted her 200 sqft garage to an ADU. She gets $1700/mth!!! I'm looking to convert my 700 sqft garage, I'll do the work. :) :) Over improving has always been an issue in real estate by home owners.

ADU's in CA are a god send!!! The key is controlling the cost of the new unit. Being able to get anywhere from $1000 - $2500 or more extra/mth is FABULOUS CASH FLOW!!! Imagine putting that home up for sale with the new buyer receiving that cashflow monthly!!! Purchase a shipping container for under $5000 and convert it. The options are almost unlimited!!!