Developer · Los Angeles, CA · Member since 2010 · 101 posts · 14 votes
Anyone have recent experience on how an ADU (accessory dwelling unit) or backhouse is valued these days relative to the main house?
For example, say if you have a house that is 1500sf and it would normally sell for $500/sf, what are people's thoughts if there was an ADU of 750sf built in the back with similar construction type as the main house?
Would future buyers significantly discount the ADU? If so, how much? 10, 20, 30% relative to the cost/sf of the main house?
Anyone have recent experience on how an ADU (accessory dwelling unit) or backhouse is valued these days relative to the main house?
For example, say if you have a house that is 1500sf and it would normally sell for $500/sf, what are people's thoughts if there was an ADU of 750sf built in the back with similar construction type as the main house?
Would future buyers significantly discount the ADU? If so, how much? 10, 20, 30% relative to the cost/sf of the main house?
John,
I'm a realtor in LA.
I'm been told by lenders that ADU's aren't appraised as additional square footage. They're appraised as an amenity, like a swimming pool or garage. Most appraisers are assigning about $50K as the value of an ADU. So for appraisals, the value isn't there.
In terms of buyers' perspectives, in my experience, ADUs don't carry the same value per square foot as the main house. For example, I'm in contract on a 2/1 in the Valley with a studio ADU attached. Compared to recent sales, we're paying more per square foot than nearby 2/1's and less than nearby 3/2's. From the seller's perspective, there's plenty of value in the ADU, but it's still a 2/1 house.
My advice is if you're considering building an ADU is to consider rental income, not resale value. The resale value won't make you much return; if you're planning to hold the property for a few years, the rental income from the ADU will generate your return.
In San Jose, not many pushing the boundaries of ADU in Multifamily, from what I can tell. Most of my question revolves around financing of (purchase + construction) for a Duplex (Single Family via Fannie / Freddie) and creating 5 rentable units. Are you now into a possible Commercial loan buying out, maybe a 203k loan?
2 turning into 5 DU is different than 10 turning into 16
I don't know about the commercial loan. I went from 4 to 5 and ended up with a commercial loan, but that's my only experience there. In my experience there's plenty of supply for lending on 5+ properties. As long as the 5th unit is a true ADU (and not a JADU with noticeably different attributes) I'd move confident that it'd go for commercial financing.
Just hypothesizing potential problems: Having 3 permitted units in a single building without commercial construction standards (fire separation and duct wrapping, fenestration wrt neighboring structures) might be called out by an experienced appraiser? Maybe I'm assuming too much knowledge to notice that.
I think your right with the loans - as for as "Commercial Construction" I believe it would be two duplex (shared walls) units (four DU in total of two buildings) plus one detached ADU (garage conversion) so 5 DU - all with construction to code
I think your right with the loans - as for as "Commercial Construction" I believe it would be two duplex (shared walls) units (four DU in total of two buildings) plus one detached ADU (garage conversion) so 5 DU - all with construction to code
Not my money or professional reputation on the line, but I would expect that to go commercial financing without a problem.