All Forum Posts by: Matthew Forrest

@Robert Reynolds I acted as owner/builder (no GC) on a conversion of an existing space to an ADU and I will say that it was very difficult, especially with other things to focus on like work and family. It can be very time consuming and very expensive if you make mistakes. I attribute at least $8,000 in lost rent due to delays from me not managing my contractors well due to inexperience. For me the education was worth it, but if the goal is purely to save money you may not save as much as you plan for when you consider opportunity cost.

@Dan H. I agree with your suspicion that "ADUs will always add less value per the appraisal than the hands off cost of construction," but how does logic of purchasing a house with someone else's "ADU goal" differ from purchasing a how with someones "addition goal" like in @Nabil Suleiman's value add example?

Houses with additions that bring square footage to the market norm are probably more desirable at this time, but I can see a scenario where there is significant demand for ADUs. Maybe in the future lenders allow people to take credit for ADU income when applying for a mortgage and that allows lower end homebuyers to get into previously inaccessible areas. Obviously a stretch, but if there's demand, there should be sales, with sales we get comps, and with comps we get value. Is my logic wrong?

@Rick Albert I currently split water based on the number of people. Not as good as a separate metering, but its less cost and seems fair to me with little added effort for billing.

@Brendan Dekora! I've already replied on some of your other post, but welcome! What city/area are you looking to make your duplex/triplex purchase?

@Kristjan Schweizer I would think that as long as you're not paying a premium for the property that assumes that the ADU is done and you see a path to having the ADU permitted, the deal will work. I purchased a property that had a "hobby room" that the previous owner had tried turning into an in-law unit (probably got 60% of the way there). I was able to finish it off and end up with a 700 sqft 1/1 ADU for less than $50k. In hindsight I probably overpaid on the purchase price, but the price was worth the education!

@Pablo Saucedo We'll take those base hits! Great job getting started.

@Fahad Masud "Correctly" is subjective. Right now homes that are zoned as SFH or R1 are appraised based on comps (from what I am told). When you have a house with an ADU and there are no comps in the area that also have an ADU, what you have in the appraisers mind is a unique SFH with what could be considered an over-improvement for the area no different from say, a $200,000 fancy swimming pool. It brings some additional value, but not what its "worth". My SFH with ADU ($2000/mo in rent) was compared to a SFH that had a workshop attached to the garage, so the appraiser gave the ADU a $40,000 value... which was generous.

@Mylen Tansingco Just to put the specific numbers out there... an ADU that provides $2000/mo in rent added $40,000 to the appraisal. Something is clearly broken right now. Either those values are going to come up or we should be buying every property that has an existing ADU.

@Paul Welden Thanks for answering so quickly! I'm most interested in the specifics around using the 203k loan to fund the ADU conversion/construction.

• Do those limits include the rehab portion of the 203k loan?
• Can I use a 203k loan for new construction (detached ADU vs garage conversion)?

Essentially can I buy a duplex for $800k and then borrow an additional $200k to build a detached ADU assuming that the value is there for an appraiser after the project is complete?

@Mylen Tansingco In my experience with my ADU on an R1 lot there was not enough appraised value to pull money out which is a large risk. It would probably be different on a 2-4 unit, but I would bet that it will be appraiser dependent whether a duplex with an ADU is the same as a duplex+ or a triplex. Has anyone on here refinanced a duplex after building an ADU?

Also, fun fact. You should be able to build two ADUs on a lot zoned for 2-4 units.