Building ADUs with Creative Financing: A Guide for Brokers and Agents

Across California, the housing shortage remains one of the biggest challenges facing homeowners, renters, and real estate professionals. Demand continues to outpace supply, and that gap is where Accessory Dwelling Units, or ADUs, are making a major difference.

ADUs are small, secondary homes built on the same property as an existing residence. Whether detached, attached, or converted from an existing structure like a garage, these units are helping homeowners create rental income, add family space, and increase overall property value. For brokers and agents, they represent an exciting opportunity to help clients expand their income potential and participate in the solution to California’s housing shortage.

Why ADUs Are a Win for Your Clients

More homeowners are exploring ways to use their property for additional income, and ADUs offer a practical and profitable path. In many cities, zoning reforms have made it easier to add an ADU, and as property values rise, so does the long-term return. Homeowners can generate rental income immediately and enjoy appreciation over time, making ADUs one of the most versatile investments in today’s market.

Why Traditional Financing Often Falls Short

Even with demand on the rise, traditional banks are often hesitant to finance ADU projects. Many borrowers face delays or rejections due to rigid income or credit requirements, especially when construction or rental use is involved. That is where creative private lending becomes essential.

Private money financing allows homeowners to access capital quickly, without the strict limitations of conventional underwriting. These loans are based primarily on property equity and the borrower’s overall plan, not just income ratios or credit scores. For brokers and agents, this means more flexibility and faster closings for your clients.

Introducing the Owner Occupied ADU Loan Program

At Pacific Direct Mortgage, we offer a specialized Owner Occupied ADU Loan Program for homeowners who wish to build a rental unit on their residence. This loan program gives homeowners access to the funds they need while ensuring compliance with all required lending regulations.

What We Need to Stay Compliant

When submitting an Owner Occupied ADU scenario, the following items are required:

1. 1.Loan Purpose Letter – A handwritten, dated, and signed letter from the borrower if the loan is brokered, or a written email or note from the borrower if direct. The letter must clearly state the purpose of the loan.
2. 2.City Confirmation – Verification that the city allows the construction of an ADU on the property.
3. 3.Plans and Permits – If plans or permits are still pending, a holdback of funds could be done for the construction, while funds are disbursed for obtaining the plans and permits.
4. 4.Contractor Bid or Owner Builder Proof – A copy of the contractor’s bid for the ADU or documentation showing that the owner builder has prior experience or professional background in construction.

These items are required to document a loan for an ADU..

How Brokers and Agents Can Benefit

Offering ADU financing to your clients is a powerful way to grow your business and strengthen relationships. By guiding homeowners through this process, you position yourself as a knowledgeable partner who understands how to turn equity into opportunity.

Here is how you can take advantage of this growing market:

• * Educate your clients early. Let them know how ADUs can help create income and boost property value.
• * Prequalify smartly. Verify the property’s eligibility for an ADU before starting the process.
• * Partner with an experienced private lender. Our team specializes in fast, compliant ADU lending, giving you and your clients confidence every step of the way.

The Bottom Line

California’s housing landscape is changing fast, and ADUs are at the center of that evolution. For brokers and agents, they represent both a service opportunity and a source of new business.

At , we make it simple to help your clients build an ADU, create new income, and add lasting value to their property. Our equity-based approach allows for fast decisions and flexible solutions that traditional lenders cannot always provide.

If you have a client planning to add an ADU to their property, send your scenario our way. Together, we can make it happen.

Ken & Ari Walker

Husband & Wife Team Phone: 707‑708‑0797 / Office: 1400 N. Dutton Ave #22 Santa Rosa, CA 95401 Ken: CA DRE Broker #01858042 / NMLS #1221130 Ari: CA DRE #01858152 / NMLS #2170867 Ken & Ari are a husband & wife team with combined 3+ decades in real estate and private money industries. They own Pacific Direct Mortgage & Real Estate, specializing in Private Money loans (also known as Hard Money home loans). Having helped thousands of Borrowers & working directly with Brokers, Agents and Lenders to help when needed with fast, flexible, alternative financing for real estate purchases and refinances throughout California. No issues with DTI ratios, credit issues, property condition, difficult to prove income ‑ we want to help!