Strategy for Analyzing an ADU

[Christian Cambridge]

Greetings all,

I'm considering a home renovation loan to convert my garage into an Accessory Dwelling Unit (ADU). The loan will change my current interest rate, so I want to make sure that the return is worth doing the renovation loan. Is there a Bigger Pockets or other tool (i.e. Rental Property Calculator, Mortgage Calculator, etc.) available for running the numbers for an ADU done through a Home Renovation Loan?

[Rick Albert]

Quote from @Christian Cambridge:

Quote from @Rick Albert:

I did the FHA 203(k) to convert my garage into an ADU. You do run into a couple of roadblocks:

1. It has to appraise. The cost to convert a garage in LA is now around $150K, but appraisers are only giving a value between $50,000-$75,000. Therefore you are going to be short.

2. The payout situation is difficult. Your contractor is going to get made because the checks come slow and low in the beginning.

I agree with the above, if you have the equity, do the HELOC. This way you are only paying out base on what you use.

Thanks Rick, this is very good insight. I purchased the home in Dec 21 so there isn't much equity yet. I was hoping to get the CalFHA grant, but that didn't come to fruition and I don't know the next time it'll be available. I'll need to put a lot more thought into my next step.

 Then here is what I would do. Consult an architect and pay to have the plans drawn up and submitted to the City. Find out when the permit expires (I believe it is a year but double check). That gives you one year to come up with the money while not having to be stuck with new building codes by the time you build.