Just thought I'd chime in here. I'm on the valuation side of things (currently out of state, soon to be back home in the cities) and I'd be careful with ADU's. As others have pointed out, zoning can be interesting and may not allow for it to be rented out at all, let alone if you intended to cash flow on the primary dwelling as well as an accessory unit.
The problem with ADU's is how uncommon they tend to be in most areas, resulting in fewer comparable properties. The problem with this is that you get less "bang for your buck" if an appraiser uses a single dwelling multi-family as a comp (such as using a triplex to compare a duplex with an accessory unit). And this makes sense intuitively. Would it be more expensive to put up a few walls and an exterior door, or build an entire new dwelling with four (or more) exterior walls, as well as literally everything else involved in building a dwelling to code? This is a simple way of looking at it, but I'm trying to illustrate my broader point.
In more complex appraisals like this, there is the added variable that every appraiser has a different level of skills, knowledge, experience, and a vast array of different perspectives on the best way to value you a property. You should see the arguments that ensue in the appraiser forums. Lol So keep in mind that just because you may have received a conditional ARV, a different appraiser may have a totally different idea as to how to approach the appraisal problem later on. And if someone sold even one SFR or MF with an ADU in the area for a low value, it could make your ARV plummet. They're rare enough that a close, local ADU comp will probably always be utilized in a market that has few. This could also work in your favor, of course, if someone was able to sell an ADU property for a comparatively high price. From an investor perspective, I'd recommend that you try to find sold ADU comparables that are superior in quality, GLA, room count, bed/bath count, etc. in the primary unit. If you intend to build an ADU and sell the property, a superior comp will pull your value up. As I said, it'll almost definitely be used (I can't guarantee anything, of course). And when you build the ADU, don't put too much extra into it because these variables can almost never be supported, unless the market has a whole lot of primary dwellings with ADU's sold in the past year. Always keep in mind that the appraiser needs to be able to defend their opinion with actual data (USPAP regs), otherwise they cannot usually make an adjustment.
This doesn't mean it's a bad idea, however. Some lenders/cities have issues with putting up a single, giant wall to partition a SFR to a MF, for example, so it could be much safer to simply build an accessory unit. Keeping in mind the potential legal consequences of renting out an accessory unit without living in the primary dwelling, it could be a great option for cash flow (especially if you want to maintain your autonomy but have someone else pay your mortgage) and an added bonus to differentiate your property from others in a major way when it comes to selling the property. The ARV is only half the battle. Making people love the property as they walk through it is the other half.
It was long, I know, but this is a multifaceted issue. To be more concise, I see it as slightly riskier and more volatile than converting a SFR to a MF, or an existing MF to include more units, due to the typical lack of market data. But for cash flow purposes, it could be a strong option.
