ADU experience in Orange County, CA or LA County, CA

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ADU experience in Orange County, CA or LA County, CA

Vickie Y.
Rental Property Investor · Los Angeles, CA · Member since 2015 · 50 posts · 19 votes

Hello everyone!

I have been an out-of-state buy and hold investor for a couple years, but am looking to purchase my personal residence closer to home. The strategy is to manufacture a "house hack" by buying a property on a large (8000+) lot with a detached garage, which I can covert to an ADU. I would live in the ADU while renting out the front house.

Location: 

I'm planning to identify a property that would "work" with the ADU restrictions. Looking in cities that have more "lenient" ADU laws. So far, I've looked at Whittier, Buena Park, Pico Rivera, Lakewood, and Bellflower.

Financing: 

I would want to use a 203k loan to cover the costs of construction of the ADU along with the property itself. Downpayment of 5-10%.

Construction: 

This is where I'm a little stuck. I know about planning and permits but I'm a little lost as to where to start with that process. 

Here are my questions: 

1) Based off the cities identified, any red flags? 

2) Any catches with the 203k loan? Will this make my offer on a house "less attractive"? Are contractors paid then, by the bank? How does disbursement work? 

3) How should I approach the construction / permits? Should I go with a company that specializes in ADUs, or will a normal GC be able to handle it? What would be the pros and cons? Should the GC go with me to look at the property prior to my purchase? I'm hearing a price of about 100-150k quoted for a 1000 sqft 2 bedroom ADU - any ideas if this sounds reasonable?

4) (probably a dumb question) How exactly does an ADU differ from just "building a second house on your lot"? Or are there no differences?


I would love to hear about people's experience with this! Thanks in advance. Please feel free to tell me if I have left out any important details and I will be sure to fill them in. 

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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
6y
Originally posted by @Ocean Van:

@John Negron I am also planning to convert my detached two-car garage to an ADU in Anaheim. Does anyone have a good contact for a designer/architect to help me with the whole design and permit? Do they need to be licensed to do all design or technically anyone, with design skills, permit and code knowledge can do it? What about contractors, do they need to be licensed as well?

Any designer/architect can theoretically do the work, but those who have done many small units are experts at optimizing space while not detracting from the aesthetics. 

As for use of non contractors, if a person does work totaling over $500 they must be licensed.  My belief is this should be higher, but I think many handymen require more oversight than most contractors.  Many handymen are hacks.  If you find a good one you have a nice find. 

Good luck

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  • John Negron
    Flipper/Rehabber · Orange County, CA · Member since 2019 · 17 posts · 3 votes
    6y

    I'm also looking to do an ADU for my detached partially finished garage at the moment in Santa Ana. If anyone has updates or questions let me know. Also I'm looking for some GCs to work with me on it. Thanks

    0Reply
  • Ocean Van
    SoCal · Member since 2016 · 4 posts · 1 vote
    6y

    @John Negron I am also planning to convert my detached two-car garage to an ADU in Anaheim. Does anyone have a good contact for a designer/architect to help me with the whole design and permit? Do they need to be licensed to do all design or technically anyone, with design skills, permit and code knowledge can do it? What about contractors, do they need to be licensed as well?

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    6y
    Originally posted by @Ocean Van:

    @John Negron I am also planning to convert my detached two-car garage to an ADU in Anaheim. Does anyone have a good contact for a designer/architect to help me with the whole design and permit? Do they need to be licensed to do all design or technically anyone, with design skills, permit and code knowledge can do it? What about contractors, do they need to be licensed as well?

    Any designer/architect can theoretically do the work, but those who have done many small units are experts at optimizing space while not detracting from the aesthetics. 

    As for use of non contractors, if a person does work totaling over $500 they must be licensed.  My belief is this should be higher, but I think many handymen require more oversight than most contractors.  Many handymen are hacks.  If you find a good one you have a nice find. 

    Good luck

    2Reply
  • John Negron
    Flipper/Rehabber · Orange County, CA · Member since 2019 · 17 posts · 3 votes
    6y
    Originally posted by @Dan H.:
    Originally posted by @Ocean Van:

    @John Negron I am also planning to convert my detached two-car garage to an ADU in Anaheim. Does anyone have a good contact for a designer/architect to help me with the whole design and permit? Do they need to be licensed to do all design or technically anyone, with design skills, permit and code knowledge can do it? What about contractors, do they need to be licensed as well?

    Any designer/architect can theoretically do the work, but those who have done many small units are experts at optimizing space while not detracting from the aesthetics. 

    As for use of non contractors, if a person does work totaling over $500 they must be licensed.  My belief is this should be higher, but I think many handymen require more oversight than most contractors.  Many handymen are hacks.  If you find a good one you have a nice find. 

    Good luck

     Hi @Dan Heuschele, that makes sense, thanks for sharing your experience. I have one who's been really dependable and has certain specialties. I was wondering to do it myself with some handy help. And leave things like running electrical to the pros.

    0Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    So I've done exactly what you want to do. I did use an FHA 203(k) loan on a remodel and garage conversion into an ADU where my wife and I live and rent out the main house.

    The biggest lesson I learned is the lender is slow to cut checks.  They are supposed to take no more than two weeks, but twice I had problems where once it took six weeks and another time it took over three weeks.

    I did it in the San Fernando Valley.  I'm happy to chat further if you would like.

    Best,

    Rick

    1Reply
  • Christopher Beloud
    Investor · Member since 2019 · 21 posts · 5 votes
    6y

    Thanks for the reply rick! I’ll send you a PM shortly, would love to ask more questions. 

    We are closing this week! 

    0Reply
  • Matthew PorcaroBusiness Member
    Lender · Long Island, NY · Member since 2016 · 457 posts · 336 votes
    6y
    Originally posted by @Rick Albert:

    So I've done exactly what you want to do. I did use an FHA 203(k) loan on a remodel and garage conversion into an ADU where my wife and I live and rent out the main house.

    The biggest lesson I learned is the lender is slow to cut checks.  They are supposed to take no more than two weeks, but twice I had problems where once it took six weeks and another time it took over three weeks.

    I did it in the San Fernando Valley.  I'm happy to chat further if you would like.

    Best,

    Rick

    Who was your lender if you don't mind me asking? That sounds horrible. My lender had the checks cut within 3 days, sometimes over night after the 203k consultant sent in the report. 

    It could have either been your 203k consultant dropping the ball taking forever to get the report out, or the bank just sounds like they don't do enough of these loans and are inexperienced. 

    This is not the norm! Sorry you had to deal with that man. 

    The 203k Way
    WebsiteView Page
    0Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Matthew Porcaro

    It was Home Bridge. It wasn’t the consultant because even he said this was the worst he has ever seen. Every check felt like a battle. Who did you use?

    0Reply
  • Matthew PorcaroBusiness Member
    Lender · Long Island, NY · Member since 2016 · 457 posts · 336 votes
    6y

    @Rick Albert

    I used a no name lender, and they were terrible with basically everything else, but they were quick to cut the checks haha.

    The 203k Way
    WebsiteView Page
    1Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    Haha no one is perfect I guess.  However the most important part is the checks.

    If I were to do it all over again I would have done a smaller project and paid the consultant to come more often to keep the checks flowing.

    1Reply
  • Luis Cruz
    New to Real Estate · Los Angeles, CA · Member since 2020 · 34 posts · 52 votes
    6y

    Hey @Vickie Y. how did things pan out with your plans/proposal?

    0Reply
  • Grace Ronquillo
    Rental Property Investor · Orange County, CA · Member since 2018 · 17 posts · 4 votes
    6y
    Originally posted by @Peter Mai:

    @Grace Ronquillo

    What City did you end up making your purchase in?  It sounds like you purchased the property without clearing everything with the City.  Just curious, what made you comfortable in moving forward?  I'm trying to use the same strategy here in OC for my first home.  Any tips you can provide would be appreciated!

    @Rob Massopust

    Any update on your project?

    Sorry for the ultra delayed response. We purchased in Brea. Main reason was to be close to work as we recently had a baby. We got comfortable moving forward because of the new laws allowing ADUs and it seemed like the city was easy to work with. We have found that to be true so far. Our construction has been delayed primarily due to covid but hoping to finish up soon. Were you able to purchase your first home?  

    0Reply
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