All Forum Posts by: Benjamin Fishler

Thank you all for the great information.... a bit of an update, the broker did actually reach out directly to their contact at Fannie Mae, and was told by them that they would make no exception to the ADU being larger than the primary house -- so they said we probably wouldn't have much luck with another lender (that, and the rate lock was at least 0.5% lower than what's available now). The lender also had a problem with the ADU having a separate house #, which is what the addressing department with the city of San Diego auto-assigns -- they wanted an "a"/"b" or "1/2" etc, not two separate numbers...not sure if that's a problem with Fannie Mae though.

The did say to try credit unions since not all of them will sell the mortgage to Fannie Mae.

We did think about trying to petition the city to switch the primary and ADU, but the two problems with that is a) There's almost a zero chance the city would get that done fast enough before rate lock expires and b) I worry that while it may be easy to switch the designation now, it may not be so easy down the line -- and if I ever want to remodel the first (original) house, i'll be limited to the 1,200 sq ft limit on ADU's if I can't get them changed back.

I think the laws/guidelines just need to catch up with the current explosion of ADU's (at least in California)... so I did what I could, which was write to the federal representatives for my area...Obviously won't help my case now, but may be able to get things updated if enough of us speak up.

Looking for advice on refinancing a SFH with an ADU on the lot in San Diego, CA as owner/builder who was planning on living in the ADU and renting out the front house.

We went through the entire loan process, got documents signed, appraisal done, closing disclosures, etc -- and at the very end, we were told that the refi loan is getting denied because Fannie Mae guidelines don't allow for ADU's to be larger than the primary house, and the appraiser won't write it as a 2-unit because it's not zoned for such (which is understandable). The ADU is ~1200 sq ft, the primary house is 1014 sq ft. Both the city and county of San Diego specifically allow ADU's to be larger than the primary home, as long as they're 1200 sq ft or less, and it's fully-permitted/signed off.

I feel like this is something the loan agent and lender should have known/told us about up-front, but they said they didn't know. We gave full disclosure on all the specs and specifics on sq footage before starting the loan.

In terms of credibility -- the two units appraised at just over 1.1 million, and we're only looking for ~390K refinance loan. We both make many times more than would have been required in income from our day jobs, have 800+ credit scores, and much more in savings/assets than would be required -- I feel like this should have been a slam-dunk refi. 

So I guess this is both a word of caution when building an ADU until Fannie Mae updates their conforming guidelines, as well as a question to anyone out there who knows of "non-conforming" or loans with good rates for this type of situation that aren't sold to Fannie Mae/etc.

Thanks for any info.

Hello BP users,

I acquired a property a while back and just got permits approved to add an ADU ("Companion Unit") in the back. The ADU requires a 600 square foot foundation. It's currently a completely open backyard with just minimal sloping (<1% grade) dirt in the area that needs the foundation and a 5' wide easy access opening to the backyard, and the structural drawings call out a very standard slab foundation. So nothing fancy that should jack up the price beyond the norm.

The problem is I've been quoted prices that vary as much as 225% among contractors, and everywhere in between -- and all of them seem extremely high based off of estimated *high* end price per square foot for slab foundations that HomeAdvisor, Fixr, AngiesList, and ProBuilder.com list what you should be paying for the San Diego area. Those websites estimate it at a high end of $8.50/sq ft for 2019 prices.

I've reached out to both contractors and subs [using California's contractor license lookup took], but I'm reaching out as an owner/builder and not a contractor or architect, so I'm thinking there may be large price inflation. So what is everyone else paying per square foot for a slab foundation?

For reference, we're talking a 24.5' x 24.5' slab 4" thick on grade w/ #3 at 18" on-center rebar with 15"W x 12"D footers, 2" sand over 10mil vapor barrier over 2" sand.

If anyone knows someone who is reasonable in cost/licensed (and bonus if they can do the rough plumbing design underneath the foundation), please let me know!

Previously, my method has been to purchase homes and hold/rent with healthy cash flow. But now I'm thinking of venturing out.

I had always run under the assumption that buying plots of land and developing couldn't really be profitable in my area, as land prices immediately around me can be a bit insane. However, recently I've started looking around and noticed in my (semi-close) area, there are plots of land for ~70K in semi-rural areas. Separately, I've noticed that you could build (nearly) turn-key log cabin home kits to put on these plots of lands in the 1000-1250 sq ft range for  ~100K (I say nearly as I'd be doing the roofing, some electrical/some plumbing/minor details-- I have experience with these). I'd hire someone to do pretty much everything else (erecting the logs, foundation, draw up the plans, etc..).  I'd act as the general contractor and work out some final details. So this puts the total at ~170K -- however I've seen multiple home sales in 2017 in this area that are in the range of 275 - 350K, and these weren't even brand new.

So in other words, it seems like with a couple of months of part-time personal weekend effort, I'd  be able to make a sale profit between 105K and 180K. While the math seems to work out, I feel like I've got to be missing something -- could it really be that easy? Buy the land, buy the kit, pay someone else to do the majority of the construction work, and reap huge profits??

I know one of the difficulties is in getting a home construction loan (high interest rates, strict time tables etc). However, we do have some of our rental properties completely paid off, and could sell one to finance this to make a larger profit than currently possible on the rental, or take out a personal loan. If it worked out, I could rinse/repeat.

For the crowd that wants to warn me about the difficulty of being my own general contractor/doing some of the home improvement projects, duly noted. Lots of experience with it, long time engineer, I have in the past made my own drawings/permits and gotten them approved by reading through city regs/docs. Experience with nearly every type construction project long and short, always see it through to the end. 

However, I know there are always unexpected pitfalls, and there are people on here far more experienced than myself in the realm of investing. What am I missing here? Should I go for it, sell a rental or get a personal loan? Other information: smaller town, but as of the past two years, home sales have seemed to be pretty steady.

Thanks so much in advance for any information/guidance.