ADU and Renting out rooms

[Jeffrey Ibale]

Hi BP family, Please knock some sense on me if I am too ambitious about this plan. I am seeking your expert opinion regarding renting out ADUs and rooms in your SFH property.

About myself, I am new to real estate investing and starting to get my feet wet. I just recently acquired my first SFH 5 bed 4 bath mortgage is around $4900 that I plan of renting the 2-3 rooms out,(currently 1 room renting out for $1000)

I plan to convert my enclosed patio that has already have a sink and fridge for the tenants to share and just plan to add a conduction stove or just an oven in it just because I don't want to share our main kitchen and living.

I also have an upcoming above garage ADU project which is about 800 sq. ft. 3 bed 2 bath/2bed 2 bath that I'm getting quote between $200-$500 per sq. ft. the reason why I chose above garage is that I wanted the ADU to look just like a house expansion that can easily be connected to the main house if I decided to get rid of the ADU in the future for selling purposes(future proofing)

I would love to hear some pros and cons about renting out a room and ADU in LA County and how do you guys manage the utilities if you include it in the rent? 

Thank you!

[Robert Reynolds]

Hi @Jeffrey Ibale,

Sounds like you are in the right track! I’d rent out all your rooms and then buy your next house if possible, instead of building the adu. The adu will take 6 months to a year to get you returns and you could instead use that money to buy a new home. 

I am building an ADU and it's been over a year since I started and in that same time I could have taken that same $120k and bought a home in Joshua Tree and it would have doubled my money. I am excited for the adu to be finished shortly but having two houses appreciating rather than just one would have been the optimal use for my money.

Robert