New Real Estate Investor with 2 properties and ADU experience
Rental Property Investor · Gardena, CA · Member since 2021 · 3 posts · 2 votes
New Real Estate Investor with 2 properties and ADU experience
Most Popular Reply
Realtor · Lone Tree, CO · Member since 2017 · 139 posts · 112 votes
5y@Dan Guenther
The ADU laws here in Denver are quickly expanding and have become less restrictive. I have only been here for 5 years and the area in which ADU's are permitted has at least doubled. I dove deep into the strategy a couple of years ago and there were a few insurmountable obstacles.
-They are hard to finance
-They are prohibitively expensive
-It can be tricky to find an appropriate lot
I even explored using modular and prefabricated options but the 36' horizontal max makes it impossible as modular options are long and skinny so they can be transported. If you can figure out a way to make it work well the potential market is so large that you would be handsomely rewarded. ADU's are much more mature in certain markets and are able to be financed more easily and built cheaper. Hopefully, this becomes the case in Denver as it would be a great density driver and affordability solution... Someone correct me if any of this has changed as it has been a little while since I have been involved in the ADU scene.
19 Replies
- 5yDan GuentherBusiness MemberReal Estate Agent · Longmont, CO · Member since 2019 · 548 posts · 271 votes
Welcome to the community and congrats on your first two investments! How the are laws on ADU's out there in CA? In Colorado here, the laws are really strict from county to county. Definitely something I am interested in learning more about.
Ten Ridge Realty LLC514 Reviews - Rental Property Investor · Gardena, CA · Member since 2021 · 3 posts · 2 votes5y
Thanks Dan. It actually varies quite a bit depending on the local jurisdiction. Overall, CA laws try to promote ADUs to help address the affordable housing shortage but local jurisdictions can make it challenging. In Gardena, CA (which is in the Los Angeles area) it was relatively straight forward. In East Palo Alto, (San Francisco Bay Area) it has been more cumbersome and costly to get plans approved with the city. Definitely the local city laws and ordinance play a key role when scoping out a project
- Real Estate Broker · Forney, TX · Member since 2019 · 1k+ posts · 399 votes5y
@David Sequeira, welcome to the BP community!
- Realtor · Lone Tree, CO · Member since 2017 · 139 posts · 112 votes5y
@Dan Guenther
The ADU laws here in Denver are quickly expanding and have become less restrictive. I have only been here for 5 years and the area in which ADU's are permitted has at least doubled. I dove deep into the strategy a couple of years ago and there were a few insurmountable obstacles.
-They are hard to finance
-They are prohibitively expensive
-It can be tricky to find an appropriate lotI even explored using modular and prefabricated options but the 36' horizontal max makes it impossible as modular options are long and skinny so they can be transported. If you can figure out a way to make it work well the potential market is so large that you would be handsomely rewarded. ADU's are much more mature in certain markets and are able to be financed more easily and built cheaper. Hopefully, this becomes the case in Denver as it would be a great density driver and affordability solution... Someone correct me if any of this has changed as it has been a little while since I have been involved in the ADU scene.
- Investor · Gardena, CA · Member since 2016 · 41 posts · 14 votes5y
@David Sequeira Congrats on finishing your ADU. Is it in the city of Gardena? I've got a Gardena address, but fall within the City of LA (Harbor Gateway). What was your experience with finding contractors and would you recommend yours? We've submitted plans for a detached ADU and are starting to work on finding a contractor(s).
- 5yJo-Ann LapinPro MemberLoan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
Thank you for posting and kudos to you . Happy to network and assist .
- Lender · Torrance, CA · Member since 2017 · 14 posts · 9 votes5y
@Ricardo Paredes
I own a condo in Harbor Gateway in Gardena off Gardena Blvd. Section 8 pays very high for that area compared to the rest of Gardena. Wish I had a single family in harbor Gateway Gardena.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes5y
Welcome to BP David and good luck investing!
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes5y
Originally posted by @David Sequeira:
Thanks Dan. It actually varies quite a bit depending on the local jurisdiction. Overall, CA laws try to promote ADUs to help address the affordable housing shortage but local jurisdictions can make it challenging. In Gardena, CA (which is in the Los Angeles area) it was relatively straight forward. In East Palo Alto, (San Francisco Bay Area) it has been more cumbersome and costly to get plans approved with the city. Definitely the local city laws and ordinance play a key role when scoping out a project
I will point out that no local jurisdiction in CA may make any rule or regulation in direct conflict with the CA state assembly bills/state senate bills passed. So when you state some jurisdictions have made it more difficult, can you elaborate more specifically?
As an example, no jurisdiction can demand a minimum lot size, limit your max size below 850sf, or limit the square footage beyond the states laws, etc.
- Member since 2021 · 5 posts · 1 vote5y
Thank you very much for the response and input. Specifically, I am working on getting plans approved for a 866sqft detached ADU unit in East Palo Alto, CA. Currently the plans are under review from the city building and safety department. Part of the approval process requires clearance from the sanitation district, which in this case is West Bay Sanitation District based in Menlo Park, CA. They are requesting I pay an impact fee of around $8,000 to obtain their approval. My architect and I sent them over assembly bill No 811 on ADUs and mentioned that the looks to be in violation of the bill quoting the following:
"Accessory dwelling units shall not be considered by a local agency, special district, or water corporation to be
a new residential use for purposes of calculating connection fees or capacity charges for utilities, including water
and sewer service, unless the accessory dwelling unit was constructed with a new single-family dwelling"They responded saying that this didn't apply to the ADU and quoted the following
"(B) For an accessory dwelling unit that is not described in subparagraph (A) of paragraph (1) of subdivision (e), a
local agency, special district, or water corporation may require a new or separate utility connection directly
between the accessory dwelling unit and the utility. Consistent with Section 66013, the connection may be subject
to a connection fee or capacity charge that shall be proportionate to the burden of the proposed accessory
dwelling unit, based upon either its size or the number of its plumbing fixtures, upon the water or sewer system.
This fee or charge shall not exceed the reasonable cost of providing this service."I haven't followed up yet. I was expecting to pay an impact fee but I thought the fee would be applied proporational to the area above 750sqft. In this case the impact fee should be access on 166sqft not the entire amount. Any thoughts you can share would be appreciated. Thank you.
- Member since 2021 · 5 posts · 1 vote5y
Actually, I have the same exact scenario. I am on harbor gateway side of Vermont and had to get all of my permits through the city of Los Angeles, not Gardena. It was tough finding contractors as many had booked schedules and could not commit to the project in the timeline I was looking for. I will send you a message with what I did directly. Thanks for reaching out. Great to hear of other nearby doing similar projects.
- Member since 2021 · 5 posts · 1 vote5y
@Alfredo Castro I property is in Harbor Gateway as well. I am in the unincorporated area of Gardena. For all of my ADU permits I had to go through the city of LA. Hmm, I will look into section 8 next. I have not considered them in the past due to lack of experience and knowledge on the subject. I hear section 8 can be a great source of secure income but with some slightly higher risks? Thanks for reaching out.
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes5y
Originally posted by @David Sequeira:
Thank you very much for the response and input. Specifically, I am working on getting plans approved for a 866sqft detached ADU unit in East Palo Alto, CA. Currently the plans are under review from the city building and safety department. Part of the approval process requires clearance from the sanitation district, which in this case is West Bay Sanitation District based in Menlo Park, CA. They are requesting I pay an impact fee of around $8,000 to obtain their approval. My architect and I sent them over assembly bill No 811 on ADUs and mentioned that the looks to be in violation of the bill quoting the following:
"Accessory dwelling units shall not be considered by a local agency, special district, or water corporation to be
a new residential use for purposes of calculating connection fees or capacity charges for utilities, including water
and sewer service, unless the accessory dwelling unit was constructed with a new single-family dwelling"They responded saying that this didn't apply to the ADU and quoted the following
"(B) For an accessory dwelling unit that is not described in subparagraph (A) of paragraph (1) of subdivision (e), a
local agency, special district, or water corporation may require a new or separate utility connection directly
between the accessory dwelling unit and the utility. Consistent with Section 66013, the connection may be subject
to a connection fee or capacity charge that shall be proportionate to the burden of the proposed accessory
dwelling unit, based upon either its size or the number of its plumbing fixtures, upon the water or sewer system.
This fee or charge shall not exceed the reasonable cost of providing this service."I haven't followed up yet. I was expecting to pay an impact fee but I thought the fee would be applied proporational to the area above 750sqft. In this case the impact fee should be access on 166sqft not the entire amount. Any thoughts you can share would be appreciated. Thank you.
Looks like you need to look up subparagraph (A) of paragraph (1) of subdivision (e) to see if it IS or IS NOT described. To me, this is in direct conflict with state law, however, it also doesn't surprise me because most often in these departments, the right hand is unaware of what the left hand is saying and in each case, you can get 5 different answers from 5 different plan checkers or inspectors. No consistency whatsoever! Its very frustrating.
Originally posted by @Will Barnard:
Originally posted by @David Sequeira:
Thank you very much for the response and input. Specifically, I am working on getting plans approved for a 866sqft detached ADU unit in East Palo Alto, CA. Currently the plans are under review from the city building and safety department. Part of the approval process requires clearance from the sanitation district, which in this case is West Bay Sanitation District based in Menlo Park, CA. They are requesting I pay an impact fee of around $8,000 to obtain their approval. My architect and I sent them over assembly bill No 811 on ADUs and mentioned that the looks to be in violation of the bill quoting the following:
"Accessory dwelling units shall not be considered by a local agency, special district, or water corporation to be
a new residential use for purposes of calculating connection fees or capacity charges for utilities, including water
and sewer service, unless the accessory dwelling unit was constructed with a new single-family dwelling"They responded saying that this didn't apply to the ADU and quoted the following
"(B) For an accessory dwelling unit that is not described in subparagraph (A) of paragraph (1) of subdivision (e), a
local agency, special district, or water corporation may require a new or separate utility connection directly
between the accessory dwelling unit and the utility. Consistent with Section 66013, the connection may be subject
to a connection fee or capacity charge that shall be proportionate to the burden of the proposed accessory
dwelling unit, based upon either its size or the number of its plumbing fixtures, upon the water or sewer system.
This fee or charge shall not exceed the reasonable cost of providing this service."I haven't followed up yet. I was expecting to pay an impact fee but I thought the fee would be applied proporational to the area above 750sqft. In this case the impact fee should be access on 166sqft not the entire amount. Any thoughts you can share would be appreciated. Thank you.
Looks like you need to look up subparagraph (A) of paragraph (1) of subdivision (e) to see if it IS or IS NOT described. To me, this is in direct conflict with state law, however, it also doesn't surprise me because most often in these departments, the right hand is unaware of what the left hand is saying and in each case, you can get 5 different answers from 5 different plan checkers or inspectors. No consistency whatsoever! Its very frustrating.
I will add that it seems like HCD is all bark and no bite. Even if HCD states that a city is not in compliance with the ADU rules, if the city ignores that direction and collects the fee HCD appears to do nothing. So why do the cities abide by any of the restrictions on collecting fees?
I am not sure how I feel about the various ADU rules (or SB9) (I have mixed feelings - I like them as an RE investor and hate them as it takes choice away for lower density areas), but if I was a law maker I would explicitly state a penalty for a jurisdiction collecting fees against the bill's direction. Maybe 3 times the fee collected and collection costs would prevent these jurisdictions from collecting fees that they are not allowed to collect. The jurisdictions would learn pretty quickly not to collect the fees that they are not entitled to.
Good luck
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes5y
Agreed @Dan H.
If only that were the case. The law also stipulates that upon receipt of submittal to plan check, they have only 60 days to approve the plans or the plans are considered "approved". Not one ADU I have been involved with or heard of was approved in 60 days or less. I assumed covid was the excuse for 2020 but enough is enough now.
Originally posted by @Will Barnard:
Agreed @Dan H.
If only that were the case. The law also stipulates that upon receipt of submittal to plan check, they have only 60 days to approve the plans or the plans are considered "approved". Not one ADU I have been involved with or heard of was approved in 60 days or less. I assumed covid was the excuse for 2020 but enough is enough now.
I am familiar with that issue but question if it is a consequence of COVID. The law as written indicates if not approved in 60 days (not counting time that jurisdiction will awaiting on input from entity requesting plan approval), it is in effect approved. No jurisdiction that I am aware of is treating plans taking more than 60 days as approved. No one (i.e. HCD) is forcing the jurisdictions to treat these unapproved plans as approved. The 60 day rule means nothing without enforcement.
Only time will show if there is enforcement of the 60 day rule once Covid is no longer an impact (which should be soon in California).
- Investor · Gardena, CA · Member since 2016 · 41 posts · 14 votes5y
@Alfredo Castro How does the amount paid by the housing authority compare to the fair market value? If for example the voucher payment for a 1 bedroom is $1765, does that mean if your unit meets the housing authority requirements they'll pay a portion of the $1765 with tenant paying the rest? How did you decide on the right rent for your condo?
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes5y
Originally posted by @Ricardo Paredes:
@Alfredo Castro How does the amount paid by the housing authority compare to the fair market value? If for example the voucher payment for a 1 bedroom is $1765, does that mean if your unit meets the housing authority requirements they'll pay a portion of the $1765 with tenant paying the rest? How did you decide on the right rent for your condo?
I can't speak intelligently on the section 8 or housing authority workings as I have no experience in that, but I can tell you that finding the rental rate is done via comps in your area. Get with a real estate agent and have them pull lease/rent comps in your area, this will give you a great idea of what rent your unit can pull.
- Member since 2020 · 1 post · 1 vote5y
Did you re-fi the property? How did the appraisal treat the ADU?
Thanks
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