Anaheim SFR with ADU conversion from detached garage

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Investment Info:

Single-family residence buy & hold investment in Anaheim.

Purchase price: $675,000
Cash invested: $161,000

SFR to convert detached garage into ADU with relaxed ADU requirements with New California state laws. Estimated additional investment of $80,000 plus solar if permitted after 1/1/2020.

What made you interested in investing in this type of deal?

Ability to have cashflow once ADU complete. New laws allowing ADU's for home owners who do not live on property

How did you find this deal and how did you negotiate it?

Broker

How did you finance this deal?

Local Lender

How did you add value to the deal?

Add 2 bedroom ADU out of detached garage.

Frank, unsure of comps for typical 2 bd house, as I have not looked for houses with just two bedrooms and assume they may be difficult to find but comps for 700 sq ft duplex and triplex 2 bedrooms are $1700 range. As typical with SoCal, a SFR does not cashflow. I will be negative cashflow of $363 until I finish the ADU and then be in great shape. Giving ROI on cash need for down/close/ADU of 5.90%. Income of $4900 a month should give property value of excess of $900,000 with locale Cap Rates.

@Chad New

Any chance you know how to get the property to appraise for your estimated value? I completed my ADU a few months ago and want to refinance my property, but I have no idea what the ADU is worth and don't want to pay for an appraisal if it's not going to show value to the ADU.

Matthew, I haven't been down that road as I plan to hold for at least five years for the appreciation and value added cash flow. My guess is for the income, $900,000 would be a bargain in this market, I would ensure to have appraisal done by some who understands multi-family investments.

@Chad New

Great deal you got there Chad! I'm curious about the solar requirement for CA. From what I know, the solar requirement is only applicable for new ADU construction. If it's a garage, I don't think it would fall under the requirement, but please correct me if I'm wrong. Also how many solar panels are required? Isn't it depended on electricity utilization? I'm curious to know about the solar requirement but don't have much info on it

David, I have yet to get the answer on whether or not solar is needed. For detached garage I have heard both. I believe when my architect completes the plans with title 24 taken into account I will get my answer. I will let you know.

Originally posted by @Chad New :

David, I have yet to get the answer on whether or not solar is needed.  For detached garage I have heard both.  I believe when my architect completes the plans with title 24 taken into account I will get my answer.  I will let you know.

Just submitted for plancheck and my T24 guy said no solar needed-detached garage ADU conversion.

 

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