All Forum Posts by: Andrew Erickson

 @Charles Renn, my understanding is that SB9 is only allowed for primary residences. You have to plan on living there for at least three years and can't kick out tenants to do it. 

 No, it is possible to build multiple units if you are in a special transportation area. 

 Good advice. Thank you! 

I'm trying to buy a small SFH and build multiple ADU units in the backyard. I'm doing it in an area where students pay about $1,100/room (in shared homes). I'm having difficulty determining the home value after the ADUs are built. Can you guys help me?

I'm trying to buy a 4 bed SFH with a large flat lot. In the backyard, I'm going to build two 1,200 sqft homes. Each home will be a 4/2 for a total of 8 extra bedrooms. For the sake of this discussion, let's assume this build complies with zoning laws.

Here are the four ways I’m calculating rough profit in this product. I’d love some advice on which one you think is best!

Assumptions

I'll be adding 8 bedrooms for about $8.8k in added monthly rent. Assuming 4 bedrooms and 1300 sqft in the primary home, I'll be collecting about $13k/mo. The primary home will cost about $900k. The complete cost of 2,400 sqft of ADU is $800k (including permitting, hookups, overhead, etc).

Rent Multiplier

San Diego rent multiplier is 14.1 annual rent. 14.1* 13k * 12 months = $2.2M.

$2.2M - $900k - $800k = $500k profit

SQFT Margin

The neighborhood is about $700/sqft. ADU build cost is $330/sqft.

(2,400 sqft + 1,300 sqft) * $700/sqft = $2.6M

$2.6M - $900k - $800k = $900k profit

NOI

Cap rate = 4.5% in San Diego.

($13k/mo * (1 -20% opex) * 12mo/yr) / 4.5% = $2.75M

$2.75M - $900k - $800k = $1,150k profit

Comps

This is very difficult. Every comp I look at with ADUs is a tiny 400 sqft office space or a 600 1bd 1 bath guest house. I can’t find anything with 2,400 sqft of housing targeted at generating as much rent as possible.

So with that being said, which model do you think makes the most sense? Any other advice?

@Ricardo S. Good for you. That’s awesome!!

That's great feedback @Lauren C.Thanks!

@Judy Parker and @Pat L., I agree. There has to be some issue that is causing that huge consumption! 

@Marc Winter is there any cheap little device I could screw on that tells me the usage of each unit? I feel like there is an easier way to do it besides tearing up the ground to connect to the street main. 

I am looking at a triplex in South Jersey. It has a single water meter for the whole property. It currently costs about $250/mo for water which is crazy high in that neighborhood. I’d like to start charging it to each unit.

What’s the best way to do that? Is it easy to install a meter for each unit? Does the city have to get involved? I’d love if there was some 3rd party tech that you could slap in there and figure out which unit is consuming so much water.

Facebook is a great idea @Trevor J.